Weiss Korea Opportunity Share Discussion Threads

[davebowler] 14/10/2024 15:02

Publication of Net Asset Value (“NAV”)
14th October 2024



Weiss Korea Opportunity Fund 163.27p

[davebowler] 30/8/2024 12:53

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New number one
Hopes of an AI-driven surge in demand for memory chips and smartphones are buoying sentiment towards Samsung Electronics (KR:005930).

The Korean group has taken top spot in Citwire’s Elite Companies smart-money rankings. This ends the eight-month reign of Alphabet (US:GOOGL) as the favourite company of Elite Investors, who represent the top c.3% of more than 10,000 equity managers Citywire tracks.

Earlier this year, Samsung signalled that a long-awaited recovery in the memory chip market was finally under way. The group is the world’s biggest memory chip maker by sales.

Strong price rises have begun to power upgrades to consensus earnings forecast for Samsung this year.



The memory industry is also experiencing burgeoning demand for cutting-edge high-bandwidth-memory (HBM) chips used in AI.

Samsung is lagging rival SK Hynix (KR:000660) in HBM development but is working hard to catch up and last month replaced its head of semiconductors as it attempts to get ahead.

AI could have broader benefits for Samsung, too. The introduction of AI-enabled smartphones and personal computers, which require whizzier hardware, has the potential to trigger a major upgrade cycle with consumers and businesses.

This could lead to a surge in demand for conventional memory and boost sales for Samsung smartphones, the world’s biggest sellers by volume, having recently retaken the lead from Apple (US:AAPL).

[davebowler] 18/8/2024 18:06

hTTps://etn.news/e-mobility-blogs/samsung-sdi-solid-state-ev-battery-latest-development

[davebowler] 16/7/2024 10:07

Citywire -
The most popular technology play globally for Elite Investors is Korean memory chip and smartphone goliath Samsung Electronics (KR:005930). It has struggled over recent years but could be set to bounce back should AI spending reinvigorate demand for memory and trigger a smartphone upgrade cycle.

[davebowler] 09/7/2024 20:35

Video about the virtues of Korean preferred sharesHTTps://www.cnbc.com/video/2024/06/24/fund-manager-on-hefty-discount-of-preferred-shares-on-korean-market.html

[davebowler] 06/7/2024 11:58

Samsung strong outlook...hTTps://www.bbc.co.uk/news/articles/c25l0yyzjvno

[davebowler] 25/6/2024 09:10

Another cheap Korean company featured here....hTTps://citywire.com/elite-companies/elite-company/hyundai-marine-and-amp-fire-insurance-kr-001450/j91853

[davebowler] 13/6/2024 09:18

Quoted Data research on Polar Capital Financials mentioned in passing how cheap Korean companies are with 66% trading below book value...

The story in emerging markets is wider than just fast-growing companies, however. PCFT has a stake in KB Financial Group (kbfg.com/eng), which offers a broad range of financial services to customers in South Korea. Here part of the attraction was Korea’s corporate governance reforms, which are focused on driving up returns to shareholders. Figure 10 shows what percentage of stocks (66%) were trading at valuations lower than book value in various markets. As in Japan, too many companies in Korea were trading far below book value. KB Financial is trading on a price/book ratio of 0.52x.


With a tier 1 capital ratio of 15.3%, KB Financial has one of the strongest balance sheets in the Korean banking sector and, by implication, scope to increase distributions to investors. 2023’s dividend was covered 3.8x by earnings and buybacks over the year were quite modest, with just 2.8% of shares in issue retired at a cost of KRW600bn.

KB Financial says that it has made environmental, social and governance (ESG) a core part of its business, making it into the Dow Jones Sustainability Index (DJSI) World Index for eight consecutive years and becoming the first Korean financial institution to achieve the highest rating (AAA) in the MSCI (Morgan Stanley Capital International) ESG evaluation.

[davebowler] 11/6/2024 09:44

A number of Korean shares feature here....

[davebowler] 03/6/2024 06:13

Wonder if Hynix is one of our portfolio companies?? hTTPs://citywire.com/investment-trust-insider/news/ai-is-a-huge-boost-nvidia-linked-chip-play-on-eight-times-earnings/a2443459?re=120884&ea=252901&utm_source=

[davebowler] 17/5/2024 07:18

HTtps://portfolio-adviser.com/will-value-up-governance-reforms-address-the-korea-discount/

[mister md] 16/5/2024 09:50

Thanks for posting. Slowly building a position here.

[davebowler] 17/4/2024 03:10

hTTps://citywire.com/investment-trust-insider/news/the-top-10-asian-stocks-the-world-s-best-investors-are-buying/a2440451?re=119391&ea=252901&utm_source=

[davebowler] 04/4/2024 11:54

Positive mention of how cheap shares are in Korea at about 18 mins in...

[davebowler] 25/3/2024 13:59

PORTFOLIO
Portfolio Statistics (as of 29 Feb 2024)

Portfolio Discount - 45.2%
Average Trailing 12-Month P/E Ratio of Preference Shares Held- 5.4x
Trailing Net Dividend Yield of Preference Shares Held -2.7%
Number of Positions - 34
Percentage of NAV Invested in Preference Shares 89.0%
Net Cash Balance - 4.3%


Top 10 Holdings - (as of 29 Feb 2024)
Hyundai Motor Company, 2nd Prf. 15%
LG Electronics Inc., Prf. 9%
Hanwha Corporation 3rd Prf. 7%
LG Chem Ltd., Prf. 7%
Amorepacific Corp., Prf. 6%
Mirae Asset Daewoo Co., Ltd., 2nd Prf. 5%
CJ CheilJedang Corp, Prf. 5%
Samsung Kodex 200 ETF 5%
Hyundai Motor Company, 3rd Prf. 4%
CJ Corporation, 1st Prf. 3%
Top 10 Holdings 66%


The ‘Portfolio Discount’ in the Portfolio Statistics table represents the discount of WKOF’s actual NAV to the value of what the NAV would be if WKOF held the respective common shares of issuers rather than preference shares on a one-to-one basis.

Korean preference shares trading at wider discounts are most often less liquid than those at narrower discounts. The Investment Manager believes that it is in the interest of shareholders for WKOF to hold less liquid shares if they increase the expected return of the portfolio. The Investment Manager plans to rebalance WKOF’s portfolio, over time, toward preference shares trading at larger discounts, consistent with its view on the most attractive portfolio.

[davebowler] 25/3/2024 13:56

Weiss Korea Opportunity Fund Ltd. NAV 183.72p at 22nd March 2024

[davebowler] 25/3/2024 13:55

QD explainer – All you need to know about Korean preference shares
30 October 2023QuotedDataQDviewAsiaInvestment CompaniesJames Carthew
Tongiljeong pavilion
Five countries dominate the MSCI AC Asia Pacific ex Japan Index – China, Australia, India, Taiwan, and South Korea – collectively, accounting for over 85% of the market cap of that index. However, most of investors’ focus seems to be on China and India, Australia is usually regarded as a resource play, Taiwan’s market is usually represented in portfolios by Taiwan Semiconductor (the largest stock in the index). It is a similar story in South Korea, where Samsung Electronics dominates (accounting for over 30% of the MSCI Korea Index). Korea’s other listed companies attract less attention, and that may be one of the reasons why they are relatively cheap. On a forward price/earnings basis, MSCI Korea is trading on a modest discount to the MSCI Emerging Markets Index, but on a price/book basis, the discount is quite pronounced (1.0x to MSCI EM’s 1.6x as at end September 2023).

There are ways of accessing Korean companies even more cheaply. Preference shares form part of the equity capital of many South Korean companies. There is a difference between preference shares as we generally understand them in the UK (where the preference shares usually rank ahead of ordinary shares in their claim to dividends and capital) and preference shares in Korea where they generally rank alongside the common shares (ordinary shares) issued by Korean companies and are entitled to receive the same dividends as the common shares but tend to have no voting rights.

Korean preference shares often trade at a substantial discount to equivalent common shares. Consequently, an investment in preference shares may offer access to South Korean companies at price/earnings and price/book ratios that are typically lower, and dividend yields that are typically higher than an investment in their common shares.

But, apart from the valuation opportunity, why would you want exposure to South Korea? Well in GDP terms it ranks 13th globally, not that many rungs down from the UK. It is well known for its record of technological and industrial innovation and has some of the leading players in sectors such as electronics, batteries, automobiles, ship building and steel. This is underpinned by heavy investment in research and development. It can also boast a burgeoning entertainment industry, with Oscar-winning Korean films and the K-pop phenomenon.

There are two structural issues that weigh on the stock market. First is an official reluctance to relax foreign exchange controls completely. This is the principal reason why, despite the relative wealth of its citizens, South Korea is still categorised as an emerging rather than a developed market by MSCI, which is problematic as that deters many investors. MSCI considered whether to upgrade Korea’s status earlier this year and opted not to make the move yet. It wants to monitor the effects of reforms that the government enacted designed to improve access to the Korean market.

Second, is a record of poor corporate governance, which stems in part from the historic dominance of family-controlled chaebols – led by Samsung, SK and Hyundai. Many Korean companies have inefficient, over-capitalised balance sheets (hence the low price/book ratio), low dividend pay-out ratios and cross-shareholdings (which tend to be valued at book rather than market value).

Improved corporate governance would help positively re-rate the Korean market and narrow its valuation discount versus other global markets. The government has been making positive changes. A Stewardship Code was introduced at the end of 2016, and this has been the foundation for reforms, with new measures still being introduced that strengthen the rights of minority shareholders. Some companies are taking action – higher dividend pay-out ratios are evidence of this – which is particularly beneficial for income investors holding discounted preference shares.

For those that can access the Korean preference share market, we have identified 123 preference share issues. Of those, at the end of September 2023, 74 preference shares were trading at a discount to the price of the equivalent common shares. The median of those discounted preference shares was trading at a 40% discount.



As you can see from Figure 1, the number of preference shares trading at a discount had been falling but has picked up again in recent weak markets. The median discount number has not changed much for some years. Individual issuers seem content to retain the common share/preference share structure of their equity base – and why not, if they can issue preference shares and thereby get cheaper funding? There is some discount volatility, however, and so an active approach to investing in Korean preference shares can add value.

For example, Samsung Electronic’s preference share issue – which is the largest and most liquid – was trading on a sub 9% discount at the start of the year and that had widened to over 20% by end September. The price of the common shares was up about 24% over that period, but the price of the preference shares was only up by about 8%. The yield on the preference shares is higher – about 2.6% to the common share’s 2.1% – but this is not enough to compensate for the discount widening.

By contrast, the discount on LG Chem’s preference share issue narrowed from about 54% to about 37%. The preference shares rose in value by about 12% while the common shares fell in value by about 17%. As the preference share yield is about 3.2% to the common share’s 2.0%, they were definitely the right part of the capital structure to be holding.

[davebowler] 25/3/2024 13:53

Masterclass -

[davebowler] 30/11/2023 15:04

29 Nov NAV 164.47.

[davebowler] 11/9/2023 09:01

8/9 NAV 163.93