Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

Hard catalysts (M&As, spin-offs, demergers) & discount arbitrage (holdco, share-class)

Event-Driven

SK Square Co Ltd operates as an investment company. The Company focus on investments in semiconductors and information and communications technologies.

<ul>
<li>Employment increased ahead of April’s jobs tax hike, and vacancies since then stayed high. Hours have also recovered despite depressed self-employment levels.</li>
<li>Firms appear to be focusing on retention, with bonus payments surging while regular pay growth slows. Nonetheless, wage settlements have been their highest since 2008.</li>
<li>This combination of rising wage deals and falling unemployment looks to be around a cyclical peak in underlying inflation pressures, probably pushing the BoE to hike in June.</li>
</ul>

Phil Rush

Chief Economist

<ul>
<li>Ong Choo Eng and his son Ong Eng Yaw, together with Roswell Assets, Dymon Asia Private Equity, and Crytalic Star have launched a voluntary Offer for <strong><a href="https://www.smartkarma.com/entities/hwa-hong-corp-ltd" target="_blank" data-smartkarma-citation="entities:6648:1" rel="noopener">Hwa Hong (HWAH SP)</a></strong>.</li>
<li>The S$0.37/share Offer is a nine-year high and a 27.6% premium to last close. It has not been declared final. </li>
<li>However, it appears not all of the founding members of the company are on the same page. The family fissure became public after the last independent director resigned this month. </li>
</ul>

David Blennerhassett

Pan-Asia Catalysts/Events

<ul>
<li>SMC 4QFY22 was in-line with consensus revenue estimates at ¥185bn, but missed at the OP level with ¥52.7bn (10% below consensus) in a now familiar pattern for the sector. </li>
<li>The company’s FY23 guidance was strong projecting revenue of ¥805bn (+4.5% vs. consensus) and OP of ¥265bn (+6.9% vs. consensus). </li>
<li>The problem is that this ignores the typical cyclicality for the company and we believe OP will in fact be down YoY.</li>
</ul>

Mio Kato

Japan/Asia Long-Short

<ul>
<li>The convenience store sector returned to growth last year but the outlook remains uncertain.</li>
<li>The big 3 chains still have a way to go to adjust to a new era of slower growth and the need for new ideas.</li>
<li>Even with new ideas on merchandising and services, the CVS sector remains saturated and the only real growth is overseas or in other formats.</li>
</ul>

Michael Causton

Japan Retail and Consumer Specialist

<ul>
<li>Aeon has finally published numbers on its e-commerce growth and performance.</li>
<li>It has a ¥1 trillion target for FY2025 and while this is still a far off target, Aeon is making progress. </li>
<li>Digital sales have doubled in the past two years and Aeon is now well ahead of Seven &amp; I which continues to fail to present a coherent e-commerce plan.</li>
</ul>

<ul>
<li>SK Square's discount to NAV is reaching 68%, pretty close to the deepest end of the local peers.</li>
<li>The cause of this price correction can be seen as the collapse of the overall market flow balance due to the LG Energy IPO.</li>
<li>Entry timing for MSCI float-rate increase momentum is early February.</li>
</ul>

Clepsydra Capital

<ul>
<li>There are 22 deletions for the MSCI Japan Index at the May SAIR. The changes were expected and there is large short buildup on quite a few of the stocks.</li>
<li>Over the last month, the largest increase in shorts as a percentage of passive selling was on <a href="https://www.smartkarma.com/entities/mercari-inc" target="_blank" data-smartkarma-citation="entities:27149:1" rel="noopener">Mercari Inc</a>, <a href="https://www.smartkarma.com/entities/ryohin-keikaku-co-ltd" target="_blank" data-smartkarma-citation="entities:2765:1" rel="noopener">Ryohin Keikaku</a>, <a href="https://www.smartkarma.com/entities/tokyo-century-corp" target="_blank" data-smartkarma-citation="entities:8053:1" rel="noopener">Tokyo Century Corp</a>, <a href="https://www.smartkarma.com/entities/sohgo-security-services-co" target="_blank" data-smartkarma-citation="entities:14181:1" rel="noopener">Sohgo Security Services</a>, <a href="https://www.smartkarma.com/entities/pola-orbis-holdings-inc" target="_blank" data-smartkarma-citation="entities:2287:1" rel="noopener">Pola Orbis Holdings</a>.</li>
<li>The deletions have underperformed the TOPIX by 22% over the last 6 months and by 10% over the last two months. Position for a bounce post implementation.</li>
</ul>

Brian Freitas

Pan-Asia Index Rebalances/Events/Delta One

<ul>
<li>
<a href="https://www.smartkarma.com/entities/tabcorp-holdings-ltd" target="_blank" data-smartkarma-citation="entities:6837:1" rel="noopener">Tabcorp Ltd (TAH AU)</a> will soon spin out its Lottery and Keno business, to be called <a href="https://www.smartkarma.com/entities/the-lottery-corporation-limited" target="_blank" data-smartkarma-citation="entities:35970:1" rel="noopener">The Lottery Corp (TLC AU)</a>. TAH shares go ex-TLC on 24 May.  </li>
<li>The question is where do they trade. What is in the price? What is not? What are the potential index implications?</li>
<li>This insight provides a grid of index implications and pro-forma valuations (EV/EBITDA, PER, Dividend Yield) for each and both and the combined entity.</li>
</ul>

Travis Lundy

<ul>
<li>
<a href="https://www.smartkarma.com/entities/faith-inc" target="_blank" data-smartkarma-citation="entities:14455:1" rel="noopener">Faith Inc (4295 JP)</a> is a very smallcap contents management and platform business. As a business, one could give it a miss forever, but it is cash-rich. </li>
<li>The company is doing a very large buyback, and for someone who decided they'd be interested, there is a large block for sale. </li>
<li>The thing is... one would have to act quickly and aggressively.</li>
</ul>

<ul>
<li>KDIC is looking to sell around half of its remaining stake in Woori Financial Group (WFG).</li>
<li>This is almost a clean-up trade considering that KDIC had a stake of nearly 18% at the start of 2021 and will now be reduced to a less than 2%.</li>
<li>In this note, we will run the deal through our ECM framework.</li>
</ul>

Sumeet Singh

Head of Research, IPOs & Placements

<ul>
<li>The local media have mentioned that nearly 200,000 people in Korea have invested in Terra (Luna) and TerraUSD.</li>
<li>The combined market caps of Luna and TerraUSD at their peaks were nearly $60 billion and nearly $57.4 billion has been wiped out in the past week.</li>
<li>Consequently, in the coming weeks there could be some domino effect of people in Korea that have borrowed money to invest in these risky cryptos selling other assets.</li>
</ul>

SK Square

SK Square Is Victim of LG Energy IPO-Triggered Market Flow Imbalance, Then Rebound Timing?