In today’s briefing:
- SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room
- LG Energy Solution: Short-Term Flow Crunch & Block Deal Possibility
- A Pair Trade Between Doosan Corp & Doosan Enerbility
- Launch Of Unlisted Korean Companies ETFs in 2023 & How Our Smartkarma Research Would Change
SK Telecom: Clarifications over ADR Creation & Premium with Zero Foreign Room
- The debating point is whether ADRs can be created from local underlying shares once the FOL is hit if the ADR issuance cap isn’t entirely burned.
- The answer is Yes. ADRs can still be created. That is one of the exceptions that the Korea FSS allows for exceeding the foreign ownership limit.
- This is why we saw a hefty premium on KT ADR when it reached and stayed at zero foreign room since 2015 AND an increase in ADRs through DR creation.
LG Energy Solution: Short-Term Flow Crunch & Block Deal Possibility
- LG Energy Solution’s real-world free-float rate should be around 5%, or 12.3M shares. We will see two additional passive inflows with the real-world float this tight.
- KOSPI 200 up-weight and FTSE June QIR New Entry’s combined inflow will be 0.6% of SO, enough for us to expect a short-term flow crunch.
- Then, there will likely be a share let-go event (block deals) by LG Chem to lessen the tight float situation, just like what KSOE had done for HHI.
A Pair Trade Between Doosan Corp & Doosan Enerbility
- There are three major reasons we like a pair trade between Doosan Corp (go long) and Doosan Enerbility (go short).
- First, share prices of two companies have diverged too much this year. Second, Doosan Corp is currently trading at a 76% discount to its NAV, which is excessive.
- Third, as investors have poured capital into nuclear power themed Doosan Enerbility, they have neglected its parent Doosan Corp.
Launch Of Unlisted Korean Companies ETFs in 2023 & How Our Smartkarma Research Would Change
- There is a strong possibility of the launch of corporate growth fund private companies ETFs in Korea in 2023.
- Once government gives final approval to launch the unlisted Korean companies ETFs in 2023, there is likely to be much greater interest in investing and researching in private Korean companies.
- Starting next year, there is a strong probability that we will spend a lot more time on researching and writing about these promising, private companies in Korea.
Before it’s here, it’s on Smartkarma
