HYBE: Block Deal Sale of SM Entertainment

• After the market close on 27 May, HYBE (352820 KS) announced that it will conduct a block deal sale of 0.75 million to 0.94 million shares of SM Entertainment.

• The block deal sale price discount is 4% to 5.5% discount to the closing price on 27 May (95,800 won).

• One of the major positive, recent issues facing the Korean K-Pop related stocks has been the potential easing of Korean content restrictions by China.

After the market close on 27 May, HYBE (352820 KS) announced that it will conduct a block deal sale of 0.75 million to 0.94 million shares of S.M.Entertainment Co (041510 KS), representing 3.2% to 4.0% of outstanding shares. The block deal sale price discount is 4% to 5.5% discount to the closing price on 27 May (95,800 won). The block deal sale price ranges from 90,531 won to 81,968 won.

The block deal sale amount ranges from 67.9 billion won to 69 billion won (assuming 0.75 million shares sale). The block deal sale amount would rise to 85.1 billion won to 86.4 billion won (assuming 0.94 million shares sale). There is a 3 month lock up on this block deal sale. Samsung Securities is the main banker on this block deal sale.

Positive on SM Entertainment

We would take this block deal and we have a Positive View of SM Entertainment, which is one of our top picks in the Korean K-Pop industry. SM Entertainment has more attractive valuations relative to its peers and we believe that SM has a more well-diversified line-up of artists and bands relative to other companies that are more reliant on one or two bands for their business. SM Entertainment has been outperforming other major competitors this year and we expect this outperformance to continue this year.

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