In today’s briefing:
- SK Square: Time to Take Profits + Why Are There Holdco Discounts in the First Place?
- SK Square Placement: Clean up by Kakao
- KOSPI Size Indices: Overlaps Between Active & Passive Flows
- The HLB Merger Swap Turned into a Messier Trading Setup with Layered Dynamics in Play
- S&SYS IPO Preview
SK Square: Time to Take Profits + Why Are There Holdco Discounts in the First Place?
- We are changing our View on SK Square (402340 KS) to Negative.
- The major reason for this change is due to the surge in its share price along with lack of upside relative to its NAV.
- Regarding SK Square, our holdco discount remains 40%. However, if there are real, positive continued efforts to improve corporate governance, this holdco discount could be reduced further.
SK Square Placement: Clean up by Kakao
- Kakao Corp (035720 KS) is looking to raise US$316m from a clean-up sale in SK Square (402340 KS) .
- The deal is a small one, representing 5.4 days of the stock’s three month ADV, and 1.7% of total shares outstanding.
- In this note, we will talk about the placement and run the deal through our ECM framework.
KOSPI Size Indices: Overlaps Between Active & Passive Flows
- The review period for the September rebalance of the KOSPI Size Indices commenced on 1 June and will end on 31 August.
- Nearing halfway in the review period, we forecast 53 migrating stocks. Among new listings, 1 stock could be added to LargeCap, 3 to MidCap and 1 to SmallCap.
- Two potential downward migrations could be deleted from a global index in August. The new listing that is a potential LargeCap add could be added to a globalindex in September.
The HLB Merger Swap Turned into a Messier Trading Setup with Layered Dynamics in Play
- Street’s wrongly assuming only 1% of total shares can exercise appraisal rights, but under Korean law, pre-meeting dissent suffices — today’s vote tells us nothing about actual buyback risk.
- Focus is on pre-dissent size — local checks point to 20% of SO, 4x the 40B KRW cap. With stock 40% below appraisal price, merger break risk looks real.
- Market’s treating deal break as bearish, deterring some from exercising appraisal despite being in the money. With spread this wide, swap leg offers high-risk, high-reward setup worth watching.
S&SYS IPO Preview
- S&SYS is getting ready to complete its IPO in KOSDAQ in August. S&SYS is a shipbuilding equipment integrated solution company.
- The company plans to offer 1.9 million shares in this public offering. The IPO price range is from 27,000 won to 30,000 won.
- To value S&SYS, the bankers used Sejin Heavy Industries Co Ltd (075580 KS), Halla IMS, HD Hyundai Marine Solution (443060 KS), and Ksp Co Ltd (073010 KS) as comps.
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