In today’s briefing:
- ADR Arb on Korean Divvy Names: A Side Play Riding the Policy-Driven Liquidity Wave
- SK Innovation Cleanup: Watch Out for a Classic NAV Compression Play
- A Merger Between SK On and SK Enmove + A Massive 8 Trillion Won in Capital Raise
- SK IE Technology – Capital Raise of 300 Billion Won
- Daehan Shipbuilding Pre-IPO: Decent Subscription Rates
ADR Arb on Korean Divvy Names: A Side Play Riding the Policy-Driven Liquidity Wave
- ETF rebalancing’s key, but still too early to front-run — both use FnGuide screens based on FY1 DPS and prices from 20 days before November-end.
- Beyond the rebalance noise, ADR-local spreads have been widening — KB hit +6%, Shinhan’s also drifting. Likely tied to the recent liquidity surge in dividend names.
- ADR arb’s more doable with NXT tightening slippage. With proper FX hedging, it’s a clean side play riding the policy-driven liquidity wave.
SK Innovation Cleanup: Watch Out for a Classic NAV Compression Play
- Facing tough fundraising, SK avoided a rights issue, opting for a complex deal to limit dilution and ease investor worries.
- It all hinges on how the market views SK On’s cleanup plus Enmove’s steady cash flow—SK Innovation looks oversold, making this a decent long setup.
- Enmove’s stable earnings boost SK On’s P&L, likely triggering a rerate for SK Innovation and setting up a classic NAV compression trade.
A Merger Between SK On and SK Enmove + A Massive 8 Trillion Won in Capital Raise
- On 30 July, SK Innovation (096770 KS) announced that it plans to merge its subsidiaries SK On and SK Enmove. The merged company will be launched on 1 November.
- SK Group has announced a massive 8 trillion won capital raise plan involving this deal including paid-in capital increase of 2 trillion won for SK Innovation and SK On each.
- We provide three major reasons why we are negative on this merger/capital raise.
SK IE Technology – Capital Raise of 300 Billion Won
- SK IE Technology (361610 KS) announced that it plans to raise 300 billion won through a third party paid-in capital allocation.
- SK IE Technology plans to issue 10.5 million new shares (14.7% of outstanding shares). Expected price of capital raise is 28,600 won (2.1% lower than current price).
- We have a Negative View of SK IE Technology as well its plans to raise capital worth 300 billion won.
Daehan Shipbuilding Pre-IPO: Decent Subscription Rates
- Daehan Shipbuilding (439260 KS) raised US$370m in its upcoming Korean IPO.
- It specializes in the design and construction of medium-sized (Aframax) and semi-large sized (Suezmax) vessels for crude oil and petroleum product transportation.
- In this note, we examine the IPO dynamics, and look at the firm’s valuation.
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