South Korea Archives | Page 63 of 126 | Smartkarma

• After the market close on 12 January, OCI Holdings (010060 KS) announced that it plans to acquire a 27.03% stake in Hanmi Science (008930 KS) for 770 billion won. 
• Through this investment and integration between OCI Holdings and Hanmi Science, the OCI Group and Hanmi Pharmaceutical Group plans to establish a joint management system.
• This deal between OCI Holdings and Hanmi Science is not over and it could lead to an M&A fight for the control of Hanmi Science by its family members. 

• Reuters reported on the Friday that the European Commission is to accept concessions of four European route divestitures and the sale of Asiana’s cargo business.
• The EC had set a preliminary decision deadline of 14 February.
• US and Japanese approvals are still required, while it remains to be seen who might acquire Asiana Cargo.

• Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
• On the IPO front, a number of large filings over the holidays is somewhat positive for 2024 prospects.
• On the placement front, 2024 picked up where 2023 left off, with Samsung Electronics (005930 KS) leading the way.

• Furuya Metal (7826 JP) and Visional (4194 JP) are expected to be included in the TOPIX index at the end of January 2024. 
• Wilmar International (WIL SP)‘s current implied stub and simple ratio (Wilmar/ Yihai Kerry Arawana Holdings (300999 CH)) are both at all-time highs.
• Reportedly, the mother and two sisters of Samsung Electronics (005930 KS) Chairman Jay Y. Lee plan to sell shares in a block deal worth ~₩2.8tn ($2.1bn billion.

• The local media have started to provide some concrete figures of the amount of losses related to HSCEI related ELS products sold by major Korean banks and securities firms.
• If HSCEI continues to remain at about 5,450 to the end of March 2024, the total losses could rise to nearly 1.6 trillion won, impacting more than 45,000 investors. 
• Concerns about HSCEI index related ELS losses have negatively impacted both the major Korean banks and securities companies in Korea in the past 1-2 months. 

• In this insight, we discuss the potential KOSDAQ150 rebalance candidates in June 2024.
• The following companies are likely candidates to be included in KOSDAQ150 rebalance in June 2024, including LS Materials, Gigavis, and Cafe24 Corp. 
• We also provide a list of 10 companies that are potential exclusion candidates from KOSDAQ150 rebalance in June 2024.

• In this note, we will take a look at broker performance for Korea IPOs and placements in 2023.
• The following dataset includes all Korean IPOs and placements above US$100m, which amounted to a total of seven deals. Given the small number of deals, we’ll keep the note short.
• The deals you see in this note are based on our historical IPO and placement tracker. Feel free to drop us a message for additional information.

• KEB Hana Bank, on behalf of the Lee family, is looking to raise up to US$1.6bn via selling 0.5% of Samsung Electronics (005930 KS) 
• The deal appears to be somewhat well flagged, however, the timing could have been much better.
• In this note, we will run the deal through our ECM framework and talk about the recent updates.

• The effective date, required by law to start six months post-promulgation, suggests implementation around July this year.
• Enforcement decrees and regulations, under the Financial Services Commission’s purview, must be confirmed before the effective date (within six months post-promulgation). The announcement is likely in early to mid-March.
• Expecting the amendment, there may be a pre-July surge in block deals as major shareholders expedite plans, creating assertive market activity in the first half with potential trading opportunities.

• We forecast EBITDAR of KRW3.35trn for Korean Air in 2023 (KRW3.8trn previously) with EBITDAR/ATK up 50% on 2019/32% on 2018. We remain at KRW2.9trn in 2024 (EBITDAR/ATK +28% vs 2019).
• Unwinding cargo yields may fully eliminate earnings gains but cost management safeguards future prospects despite Asiana merger uncertainty.
• Cost inflation management inflected negatively in 3Q as labour costs rose – control crucial as market conditions normalize and low cost competitors expand.

• LG Energy Solution reported disappointing preliminary earnings in 4Q 2023. The company reported operating profit of 338.2 billion won (43.5% lower than consensus).
• Post a major earnings miss for LGES in 4Q 2023, the consensus is likely to reduce earnings estimates of the company in 2024 and 2025.
• Major EV players such as Tesla were reducing prices in the past year causing higher pressures on EV battery makers such as LGES to reduce their prices as well. 

• The KOSPI 200 INDEX is correcting after a long multi-week rally. Currently down for 2 weeks (to be confirmed this Friday at close), it’s becoming OVERSOLD.
• There is a risk of a large slide during this week, so LONG trades should be taken with a careful, hedged approach, but the LONG reversal is pending…
• The price area between 345 and 334 is where the index could stop its pullback and reverse.

• In the past year, four KOSPI transfer listings showed similar patterns, with pre-listing price increases and substantial corrections in the first five trading days post-listing.
• ChatGPTAmid a sideways market and a 54.2% YoY growth in the local ETF market last year, the impact of passive flow imbalances may have been more significant than before.
• A key factor is the short-selling ban. Posco DX’s SSFs showed significant backwardation pre-KOSPI listing, concentrating proactive short positions, requiring caution in adjusting pre-listing short position costs.

• We discuss the potential KOSPI200 rebalance candidates in June 2024. In the past several years, there have been a lot of alpha generating stocks arising from the KOSPI200 rebalances.
• The following companies are likely candidates which could be included in KOSPI200 rebalance in June 2024, including Posco DX, Doosan Robotics, Hyosung Heavy Industries Corp, and DS Dansuk. 
• For the potential exclusion candidates, we included 10 stocks that are in the bottom 5% market caps in KOSPI200.

• Riding on multiple export contracts, Caregen Co Ltd (214370 KS) was confident of achieving KRW60–100B revenue from ProGsterol in 2023. However, during 9M23, ProGsterol clocked revenue of KRW8.5B.
• ProGsterol should rebound in this year, with the resumption of registration process in each country. Direct entry in the U.S. should be the strong catalyst for ProGsterol revenue this year.
• Caregen is developing an eye drop for wet macular degeneration. This is in phase 1 trial. The compay is preparing for phase 2 trial for COVID-19 nasal spray in Israel.

• Stay long in HS Holdings (8699 JP).But beware. It is possible that there is a slightly uncomfortable outcome. 
• Celltrion Pharm (068760 KS) is up 37% since the Celltrion Inc (068270 KS)/Celltrion Healthcare (091990 KS) merger completed; and Inc is up 22%. That’s A LOT of expectation baked in. 
• NEW NISA details are cute, but governance and corporate buybacks matter more. If better education induces a swing from cash/deposits to risky assets, much of that will happen outside NISA.

• Our base case valuation of Hyundai Hyms is implied target price of 8,025 won per share, which is 27% higher than the high end of the IPO price range. 
• We believe Hyundai Hyms’ valuation premium to the comps is appropriate due to much stronger operating profit growth and its strong relationships with HD Hyundai Heavy Industries.
• Hyundai Hyms’s main business includes shipbuilding equipment and related services. The company manufactures a wide variety of items necessary for ship construction, such as ship unit blocks and piping manufacturing.

• A double dose of stubs this week as Hanmi Science (008930 KS) comes up “cheap” on my monitor.
• Preceding my comments on Hanmi are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Local market information indicates potential collaboration between KRX, FSS, and KSD to create a Korean EquiLend, aiming to centralize the stock lending channel.
• Unprecedented globally, President Yoon aims to centralize short selling. The challenge lies in mandating foreign investors to use Korea’s platform, necessitating a complex legal framework.
• Despite the difficulty, local authorities are compelled to pursue this initiative, raising the likelihood of a Korean EquiLend. Developing strategic plans in response is imperative.

• We argue that the top 20 listed construction companies in Korea are likely to underperform KOSPI in 2024 mainly due to the excessive risks in the housing/commercial real estate sectors.
• We expect the share prices of these 20 domestic construction companies to fall by at least 15%-20%+ on average in the next 6-12 months. 
• On 2 January 2024, Financial Supervisory Service (FSS) announced that there will be new reporting requirements for PF loans of Korean construction companies starting 2023 annual reports.

• Alteogen Inc (196170 KS)‘s first proprietary recombinant human hyaluronidase liquid product, Tergase (ALT-BB4) is currently under approval process in Korea and is expected to receive approval in early 2024.  
• Tergase is a stand-alone hyaluronidase product that can be used for the treatment of various medical conditions, such as pain relief, edema treatment, and hyaluronic acid filler removal.
• Compared to commercially available animal-derived hyaluronidase products in the market, Tergase is a highly purified product of high-quality with very few impurities and an excellent side effect profile.

• After biopharmaceuticals developer and producer Celltrion Inc (068270 KS) recently completed its merger with Celltrion Healthcare (091990 KS), Celltrion Pharm (068760 KS) came (more) into focus.
• Pharma is now up ~37% since Inc and Healthcare merged.
• That’s quite a lot of expectation baked in.  Probably too much.

• In this insight, we highlight the recent pricing gap divergences of the major Korean holdcos and opcos which could provide trading opportunities in 1Q 2024. 
• We highlight 38 pair trades that involve Korean holdcos and opcos.
• Of the 38 pair trades, 26 of them involved holdcos outperforming opcos in the past six months and 12 of them involved opcos outperforming holdcos in the same period.

• The review period for the March rebalance ends on 31 January, the changes will be announced early March and implemented at the close of trading on 14 March.
• There is one change currently for each of the Secondary Battery, Bio, Internet and Game indices. There are two changes for the BBIG Index.
• There will be big flow on Ecopro BM (247540 KS) and Posco Future M (003670 KS) and big impact on Douzone Bizon (012510 KS) and DearU (376300 KS). 

• In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2024. 
• The excessive gaps in the preferred and common shares of Kumho Petro Chemical, Amorepacific Corp, and Samsung Electronics could reverse in the next several months.
• We see some attractive longer-term opportunities for Amorepacific, Doosan Fuel Cell, LG Electronics, and CJ Cheiljedang which have especially high discounts for the preferred shares versus their counterpart common shares.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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