Mirae Asset Securities' Korean Stock Picks (March-April 2024)
"A Country Without Shareholder Rights" + KT Corp, SK Telecom, SK Hynix, Lotte Innovate, Korea Aerospace Industries, Hanwha Aerospace, Korean Air, Samwha Capacitor, Jin Air, KEPCO, etc.
Last month, South Korea held National Assembly elections with the main opposition Democratic Party winning 161 seats out of 254 directly elected seats in a landslide victory. This will have some implications for investors:
📰 South Korea election a minor setback for capital market reform (Nikkei Asia) April 2024 🗃️
"As far as investors are concerned, this will be considered a setback not just for the Value-up Program but the overall market," said Peter Kim, head of global distribution at KB Securities in Seoul.
"The ruling party had a difficult time passing their pro-business policies, and now we'll have a similar situation for a couple more years," he said.
"A left-wing-dominant National Assembly could be less cooperative on tax incentives for the Corporate Value-up program, as the incentives could be deemed a tax cut for the wealthy class," Citi Research economists led by Jin Wook Kim said in a report on Wednesday.
"We expect share price momentum from the Corporate Value-up theme to temporarily weaken for the next several months, and only become viable again from around the mid-second half of 2024," they said.
The problem is with Korea’s high inheritance taxes discouraging large family-run conglomerates from implementing reforms that would help increase share prices:
📰 South Korea's plan to boost stock market disappoints investors (Nikkei Asia) March 2024 🗃️
Chaebol benefit from low share prices due to high inheritance tax, experts say
Our Monday post mentioned this book - I am not sure if the book has been translated into English:
🇰🇷 A Country Without Shareholder Rights (주주 권리가 없는 나라) - A Book Review (Douglas Research Insights) $
This insight is a book review of 주주 권리가 없는 나라 (A Country Without Shareholder Rights), which is one of the best books on the corporate governance in Korea.
There are so much wisdom that are included in this book. The author really goes into details about numerous corporate governance problems in Korea and ways to fix them.
This book was published in January 2024 and it was written by a famous Korean retail investor called Park Young-Ok.
The first three problems and their detailed descriptions are not behind a paywall:
1) Corporate Governance Comparisons between Korea and Taiwan stock markets [PROBLEM]
2) Destroying Shareholder Value Through Physical Divisions (Split) of Subsidiaries (SK On/SK Innovation; LG Energy Solution/LG Chem; SK Bioscience/SK Chemical; Kakao Bank/Kakao Corp) [PROBLEM]
3) Flawed Merger Method in Korea Which Could Destroy Shareholder Value [PROBLEM]
And:
The author mentions that the overall corporate governance levels in Korea are similar to the US corporate governance levels in 1970s to 1980s so there is a lot of catching up to do.
However, Douglas mentioned that several years ago, it was estimated the book’s author had investments in Korean stocks worth more than 200 billion won (US$150 million) - meaning minority shareholders and retail investors can still make money in the Korean stock market...
You will just need to be extra selective and have patience…
Mirae Asset Securities (KRX: 006800 / 520003 / 00680K) is the largest investment banking and stock brokerage company by market capitalization in South Korea. They come out with (and post on their website) a steady stream of free research pieces - namely about Korean stock picks.
Stocks covered by their research during the month of April and (in the order they covered them from the most recent to the earliest in the month) in this post include:
SK IE Technology Co Ltd; Cosmo Advanced Materials & Technology Co Ltd; Amorepacific Corp; Soop Co Ltd; Hyundai Rotem; GS Engineering & Construction Corp; Hanwha Systems Co Ltd; KT Corp; SK Telecom; Chong Kun Dang Pharmaceutical Corp; Cosmax; Samsung SDS; Samsung Engineering; Classys; Hanwha Solutions; Posco International Corp; Posco Future M Co Ltd; LG Energy Solution; LG H&H; Dentium; Hyundai Glovis; SK Hynix; Krafton; LG Uplus; LG Innotek; HD Hyundai Electric Co Ltd; Samsung Biologics; Samsung C&T Corp; LX Hausys; SM Entertainment Co Ltd; Dear U Co Ltd; JYP Entertainment Corp; Lotte Innovate Co Ltd; Hyundai Engineering & Construction; HYBE; Shinsegae Inc; F&F Co; ST Pharm; Hyundai AutoEver; Yuhan Corp; LIG Nex1 Co; Korea Aerospace Industries; Hanwha Aerospace; SoluM Co Ltd; OCI Holdings; CJ Logistics; Daewoo Engineering & Construction Co Ltd; DL E&C Co Ltd; Samsung Electronics; Korean Air; Wemade; S-Oil Corp; Samsung Electro-Mechanics Co Ltd; Samwha Capacitor Co Ltd; Jin Air Co Ltd; & Kakao
And for March (as there were significantly fewer reports than normal):
Chong Kun Dang Holdings; HD Hyundai Electric Co Ltd; KEPCO; People & Technology; & Creative & Innovative System C
Mirae Asset Securities publishes their Korean stock pick research in English. Note that when I click on their website, I receive NO pop-up asking what sort of investor I am or my location; but there is this disclaimer at the end of each of the research report PDF files:
This post will NOT be quoting directly from the website or research documents themselves (beyond giving the title of the report - please keep the above disclosures in mind).
Keeping their disclaimers in mind, you might want to open the Research Report section of their website and select Company Analysis on your phone or in another tab or browser to look over the short titles of their research pieces (summarizing their thoughts and linked to a couple paragraph summaries on their website) and their advice about the stock picks.
However, their summaries and the more detailed research contained in the PDF files do NOT include good long term technical charts, descriptions of what the company does or links to the stock pick’s IR page, current quote, or most recent statistics - all pet peeves of mine when not made available.
To make your life easier, this post includes:
A heading with the stock name.
A quick description of the stock pick with links to the IR page and stock quote(s) on Yahoo! Finance.
A link to any Wikipedia page (for what it might be worth…)
The title of the report linked to the short summary brief on the Mirae Asset Securities website.
The link to the Mirae Asset Securities research report PDF file about the stock pick.
A price/book (most recent quarter) ratio plus forward or trailing P/E and dividend yields linked back to the Yahoo! Finance statistics page.
The latest long term technical chart linked back to Yahoo! Finance.
And as always, this post is provided for informational purposes only (and again, to make your life easier…). It does not constitute investment advice and/or a recommendation…
Keep in mind that Mirae Asset Securities would more or less be doing sell side research (with all the usual conflicts of interest that can arise from doing that) and you probably will never or rarely see a sell recommendation from them - just like you almost never see a sell recommendation coming from Wall Street…
But their equity research comes with good stock financials and it’s in English (as again, many Korean stocks still do not have IR pages or financial reports in English) - meaning its a good starting point for anyone interested in investing directly in Korean stocks.
April
SK IE Technology Co Ltd
SK IE Technology Co Ltd (KRX: 361610) is manufacturing and selling battery materials in South Korea, Asia, and Europe. The company operates through two segments: LiBS and New business division. It develops and provides separators for IT devices and EV batteries; manufactures film based and ceramic coated separators; and flexible cover window material for foldable displays.
Price/Book (Most Recent Quarter): 1.74
Forward P/E: 78.12 / Forward Annual Dividend Yield: N/A (Yahoo! Finance)
Cosmo Advanced Materials & Technology Co Ltd
Cosmo Advanced Materials & Technology Co Ltd (KRX: 005070) provides secondary battery cathode active materials in South Korea and internationally. The company manufactures and supplies high-Ni-based cathode active materials used in electric vehicles and energy storage systems, including lithium cobalt oxide, as well as used in secondary batteries for IT, such as smartphones, tablet PCs, and laptops. It also offers color toner and MLCC release films, semiconductor package adhesive films, halogen free insulation films, and display materials, as well as supplies magnetic tapes.
Cosmo AM&T (005070 KS/Buy) - Cathode materials revenue to see full-fledged growth in 2H24
Price/Book (Most Recent Quarter): 10.39
Trailing P/E: 177.82 (no forward P/E) / Forward Annual Dividend Yield: N/A (Yahoo! Finance)
Amorepacific Corp
Amorepacific Corp (KRX: 090430) is a South Korean beauty and cosmetics chaebol, operating more than 30 beauty, personal care, and health brands including Sulwhasoo, Laneige, Mamonde, Etude House, AMOREPACIFIC and Innisfree. The firm was founded in 1945 by Suh Sung-whan and currently managed by Suh Kyung-bae, the son of the founder. It is the second-largest cosmetics company in South Korea and one of the 10 largest cosmetics companies in the world.
Price/Book (Most Recent Quarter): 2.44
Trailing P/E: 66.46 (no forward P/E) / Forward Annual Dividend Yield: 0.73% (Yahoo! Finance)
