Brief Korea: Nexon Sale: Bidding Pushed Back to Next Month – This Is All About Tencent and more

In this briefing:

1. Nexon Sale: Bidding Pushed Back to Next Month – This Is All About Tencent
2. Asiana Airlines Bailout: KDB Demands a Massive Rights Offer
3. Global Ex-U.S. Equity Strategy: Positive Outlook Intact; Remain Overweight China
4. Asian Bank Asset Quality: “One Overdue, Two Bad” 一逾两呆 The Complex Journey of the NPL
5. StubWorld: Amorepacific Is “Cheap”, Again; Kingboard Cleans House

1. Nexon Sale: Bidding Pushed Back to Next Month – This Is All About Tencent

Korea’s news outlet Maeil Economic Daily reported yesterday that the main bidding of Nexon sale was pushed back to next month. It was originally planned for this month. Maeil said lower-than-expected interest among potential bidders was the main reason. More specifically, Tencent isn’t showing any serious commitment or intention.

Tencent is the key player in this event. But Tencent seems to be hiding its cards. Following are reasonable conclusions at this point wrt what must be going on in this deal:

1. Tencent has the upper hand in all situations.
2. Tencent must be the one who is taking more time and pushing back the schedule.
3. But there is still a higher chance that Tencent will stay in this race to the end.
4. But it is also very possible that final offer price will be lower than initially and currently expected as Tencent will likely get better deal conditions.

2. Asiana Airlines Bailout: KDB Demands a Massive Rights Offer

KDB’s press release came out WRT Asiana Airlines (020560 KS) liquidity crisis shortly after the market closed yesterday. KDB clearly said that Kumho Asiana Group’s self-rescue plans aren’t acceptable. KDB made it clear that there will be only two ways here: massive rights offer and asset selloff.

3. Global Ex-U.S. Equity Strategy: Positive Outlook Intact; Remain Overweight China

Incremental technical developments continue to be of the bullish variety as more and more countries/regions begin to participate in the rally. These ongoing improvements further cement our positive overall outlook, and we continue to believe that global equities (MSCI ACWI) are poised for additional strength moving forward. In our April International Strategy, we highlight various themes which lead to our overall positive outlook, along with areas within the world’s markets where we see immediate opportunity.

4. Asian Bank Asset Quality: “One Overdue, Two Bad” 一逾两呆 The Complex Journey of the NPL

• Asset Quality recognition is something of a black art with varied definitions for non-performing loans (“NPLs”).
• Firstly, we analyse what a NPL is.
• We then evaluate provisioning changes across Asia. We rank countries.
• We further analyse specific underlying NPL recognition issues in China.
• We then rank a sample of regional banks and countries by NPL recognition.
• Later, we take a look at how different systems come under NPL stress and how they cope often in a crisis environment.
• Finally, we wrap things up with some concluding insights about the cultural backdrop which defines systemic asset quality.

5. StubWorld: Amorepacific Is “Cheap”, Again; Kingboard Cleans House

This week in StubWorld …

• Amorepacific Group (002790 KS)‘s discount to NAV veers towards its one-year wide level, however newsflow, liquidity and financial performance side with Amorepacific Corp (090430 KS).
• Kingboard Laminates Holdings (1888 HK)‘s more reasonable tilt for Kingboard Copper Foil Hldgs (KCF SP) has minimal bearing on the group, but one wonders when Elec & Eltek Int (ELEC SP) will similarly be taken out.

Preceding my comments on Amorepacific, Kingboard and other stubs, are the weekly setup/unwind tables for Asia-Pacific Holdcos.

These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.