Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p><span data-hook="tip" data-type="arken" data-lang="en">On 26 November, <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> officially announced the formation of another Holdco (tentatively named 'LG NewCo') and the split of 4 companies (out of 13 affiliates) from LG Corp including <a href="https://www.smartkarma.com/entities/lg-international-corp" target="_blank" data-smartkarma-citation="entities:3281:1" rel="noopener">LG International (001120 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-hausys-ltd" target="_blank" data-smartkarma-citation="entities:11613:1" rel="noopener">LG Hausys Ltd (108670 KS)</a>, <a href="https://www.smartkarma.com/entities/silicon-works-co-ltd" target="_blank" data-smartkarma-citation="entities:20670:1" rel="noopener">Silicon Works (108320 KS)</a>, and LG MMA. In addition, Pantos will become an affiliate of LG International. The LG NewCo will be operated separately from LG Corp and the former company will have its own separate BOD and senior professional managers who will oversee the company. </span>The new BOD will be headed up by Koo Bon Joon, the uncle of the current LG Chairman Koo Kwang Mo. </p><p>Overall, we believe this creation of the LG NewCo will have a positive impact on <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a>. However, the overall impact is likely to be much bigger for LG NewCo than LG Corp. Therefore, once the two stocks start to trade again on May 27th, 2021, there is a good chance that LG NewCo stock price rises higher than LG Corp.</p><p>In this insight, we have also provided an updated SoTP valuation of LG Corp and a SoTP valuation of LG NewCo.</p>

On 26 November, LG Corp (003550 KS) officially announced the formation of another Holdco (tentatively named 'LG NewCo') and the split of 4 companies (out of 13 affiliates) from LG Corp including LG International (001120 KS), LG Hausys Ltd (108670 KS), Silicon Works (108320 KS), and LG MMA. In addition, Pantos will become an affiliate of LG International. The LG NewCo will be operated separately from LG Corp and the former company will have its own separate BOD and senior professional managers who will oversee the company. The new BOD will be headed up by Koo Bon Joon, the uncle of the current LG Chairman Koo Kwang Mo. Overall, we believe this creation of the LG NewCo will have a positive impact on LG Corp (003550 KS). However, the overall impact is likely to be much bigger for LG NewCo than LG Corp. Therefore, once the two stocks start to trade again on May 27th, 2021, there is a good chance that LG NewCo stock price rises higher than LG Corp.In this insight, we have also provided an updated SoTP valuation of LG Corp and a SoTP valuation of LG NewCo.

LG Group Announces the Formation of LG NewCo & Split of 4 Companies from LG Corp

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

<p>LG Chem 1P is now at a -2.2σ on a 20D MA, the widest since late September.</p><p>The pref discount sits at 52.3%, up 5% (2.5%p) from the 120D mean and 10.6% higher than the 2-yr mean.</p><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"% of sigma"}'>% of sigma</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Today"}'>Today</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-2.1763718909748957}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Data!R[0]C[6]">-217.64%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"T-1"}'>T-1</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.671940190709215}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Data!R[0]C[6]">-67.19%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"T-2"}'>T-2</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-1.0667462830571939}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Data!R[0]C[6]">-106.67%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"T-3"}'>T-3</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.574155568371956}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Data!R[0]C[6]">-57.42%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"T-4"}'>T-4</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.03722405013214451}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Data!R[0]C[6]">3.72%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"T-5"}'>T-5</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.024132981985171883}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=Data!R[0]C[6]">2.41%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><table class="table table-striped">
<colgroup>
<col width="300">
<col width="300">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Pref discount"}'>Pref discount</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Today"}'>Today</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5225281602002503}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=RP!R[445]C[5]">52.25%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"120D mean"}'>120D mean</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.49782320844450034}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=average(RP!R396C7:R494C7)">49.78%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"120D median"}'>120D median</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5014577259475219}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MEDIAN(RP!R396C7:R494C7)">50.15%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"120D high"}'>120D high</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5333333333333333}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MAX(RP!R396C7:R494C7)">53.33%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"120D low"}'>120D low</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4236111111111111}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MIN(RP!R396C7:R494C7)">42.36%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1Y mean"}'>1Y mean</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.49881580622124455}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=average(RP!R248C7:R494C7)">49.88%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1Y median"}'>1Y median</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.49949135300101727}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MEDIAN(RP!R248C7:R494C7)">49.95%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1Y high"}'>1Y high</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5746268656716418}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MAX(RP!R248C7:R494C7)">57.46%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"1Y low"}'>1Y low</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4236111111111111}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MIN(RP!R248C7:R494C7)">42.36%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2Y mean"}'>2Y mean</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.47259331641753594}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=average(RP!R2C7:R494C7)">47.26%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2Y median"}'>2Y median</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4592696629213483}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MEDIAN(RP!R2C7:R494C7)">45.93%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2Y high"}'>2Y high</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5746268656716418}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MAX(RP!R2C7:R494C7)">57.46%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"2Y low"}'>2Y low</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4158273381294964}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=MIN(RP!R2C7:R494C7)">41.58%</td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/173/796/original/chart.png?1606252618" class="editor-image img-responsive" data-smartkarma-image-id="173796"></figure></section>

LG Chem 1P is now at a -2.2σ on a 20D MA, the widest since late September.The pref discount sits at 52.3%, up 5% (2.5%p) from the 120D mean and 10.6% higher than the 2-yr mean.





% of sigma

Today
-217.64%


T-1
-67.19%


T-2
-106.67%


T-3
-57.42%


T-4
3.72%


T-5
2.41%

Source: KRX







Pref discount

Today
52.25%


120D mean
49.78%


120D median
50.15%


120D high
53.33%


120D low
42.36%


1Y mean
49.88%


1Y median
49.95%


1Y high
57.46%


1Y low
42.36%


2Y mean
47.26%


2Y median
45.93%


2Y high
57.46%


2Y low
41.58%

Source: KRX



Tesla Rally Pushed LG Chem 1P Diversion to an Extreme: Trade σ Reversion & 1P Div

Equity Bottom-Up

<div class="content-highlight">
<p><strong>In this insight, we provide an updated SoTP valuation analysis on <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a>. We have a positive view of this stock. Our base case valuation analysis suggests an implied price of 120,787 won per share, representing a 60% upside from current levels.</strong></p>
</div>
<p>In addition to its deep discount versus its NAV, there are also 4 key catalysts for the company which are as follows:</p>
<ul>
<li><strong>Potential for higher dividends</strong></li>
<li><strong>IPO of LG Energy Solutions</strong></li>
<li>
<strong>Split of LG International and LG Hausys </strong><strong>from the LG Group </strong>
</li>
<li><strong> Time to Close to the Gaps With Major Affiliates </strong></li>
</ul>


In this insight, we provide an updated SoTP valuation analysis on LG Corp (003550 KS). We have a positive view of this stock. Our base case valuation analysis suggests an implied price of 120,787 won per share, representing a 60% upside from current levels.

In addition to its deep discount versus its NAV, there are also 4 key catalysts for the company which are as follows:

Potential for higher dividends
IPO of LG Energy Solutions

Split of LG International and LG Hausys from the LG Group 

 Time to Close to the Gaps With Major Affiliates 


Equity Capital Markets

Lotte Energy Materials / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/iljin-materials-co-ltd" target="_blank" data-smartkarma-citation="entities:7709:1" rel="noopener">Iljin Materials (020150 KS)</a> announced after the market close 9 November that it plans to IPO its 100% owned Malaysian subsidiary <a href="https://finance.naver.com/item/news_read.nhn?article_id=0004446565&amp;office_id=015&amp;code=020150&amp;sm=title_entity_id.basic" target="_blank" rel="noopener">IMM Technology</a>, which generated sales of 43.7 billion won in 2019. IMM Technology is a Malaysian company that produces elecfoil for rechargeable batteries. Elecfoil is a thin copper foil used for cathode collectors in rechargeable batteries. It is widely used in electric vehicles (EV) and energy storage systems (ESS). </p><p>IMM Technology recently hired Korea Investment &amp; Securities and Shinhan Investment &amp; Securities as the lead bankers on this IPO deal. IMM Technology was established as a 100% subsidiary of Iljin Materials in 2017. IMM Technology produces nearly 20,000 tons of elecfoil for rechargeable batteries per year. IMM Technology plans to expand capacity to 30,000 tons by the end of 2021. This elecfoil production facility in Malaysia is even bigger than the company's copper foil production facility in Iksan (Jeonbuk), South Korea which has an annual production capacity of 16,000 copper foil. </p><p><strong>2021 - The Year of Rechargeable Batteries IPOs in Korea - </strong>Next year will be the year of the rechargeable batteries IPOs in Korea. The biggest rechargeable battery IPO will be LG Energy Solutions (LG Chem), followed by SK IE Technology (SK Innovation). Iljin Materials' IMM Technology will follow these two IPOs as well. Overall, we believe the IPO listing of the IMM Technology Malaysian elecfoil business is likely to be a key positive catalyst for Iljin Materials over the next 6-12 months. </p>

Iljin Materials (020150 KS) announced after the market close 9 November that it plans to IPO its 100% owned Malaysian subsidiary IMM Technology, which generated sales of 43.7 billion won in 2019. IMM Technology is a Malaysian company that produces elecfoil for rechargeable batteries. Elecfoil is a thin copper foil used for cathode collectors in rechargeable batteries. It is widely used in electric vehicles (EV) and energy storage systems (ESS). IMM Technology recently hired Korea Investment &amp; Securities and Shinhan Investment &amp; Securities as the lead bankers on this IPO deal. IMM Technology was established as a 100% subsidiary of Iljin Materials in 2017. IMM Technology produces nearly 20,000 tons of elecfoil for rechargeable batteries per year. IMM Technology plans to expand capacity to 30,000 tons by the end of 2021. This elecfoil production facility in Malaysia is even bigger than the company's copper foil production facility in Iksan (Jeonbuk), South Korea which has an annual production capacity of 16,000 copper foil. 2021 - The Year of Rechargeable Batteries IPOs in Korea - Next year will be the year of the rechargeable batteries IPOs in Korea. The biggest rechargeable battery IPO will be LG Energy Solutions (LG Chem), followed by SK IE Technology (SK Innovation). Iljin Materials' IMM Technology will follow these two IPOs as well. Overall, we believe the IPO listing of the IMM Technology Malaysian elecfoil business is likely to be a key positive catalyst for Iljin Materials over the next 6-12 months. 

Iljin Materials - IPO of Its 100% Owned Malaysian Subsidiary IMM Technology in 2021

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<p>In September, <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> announced that it would split its Battery business (around 42% of total revenue) into a separate business. The plan was approved by a majority of shareholders on October 30<sup>th</sup>. By December 1<sup>st</sup>, the new battery business, tentatively named “LG Energy Solutions” will be formed.</p><p>The second-largest shareholder - National Pension Service (NPS), with around a 10% stake, was against the split in business, citing a loss in shareholder value as a concern. Following the news, LG Chem’s share price dropped by about 6% during the day, however, the share price has recovered since then and has increased by 17.8% compared to the close on the 30<sup>th</sup> of October. We agree that the possible dilution in equity value should concern current shareholders. However, for the battery business as a whole, we feel that this is advantageous. The battery business will now receive the focus and attention it deserves, and given the current EV momentum, this could be the best strategy LG Chem could adopt to grow its battery business. During the first eight months of 2020, LG Chem also led the battery market, beating <a href="https://www.smartkarma.com/entities/contemporary-amperex-techn-a" target="_blank" data-smartkarma-citation="entities:24404:1" rel="noopener">CATL (A) (300750 CH)</a>, which held the leading position until 2019. We believe that this a good time to split the battery business and that this should allow the new business to grow strongly and closely compete with pure EV battery leader CATL.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/170/199/original/image_70601135821604899855622.png?1604899857" class="editor-image img-responsive" data-smartkarma-image-id="170199"></figure><p>We go through the details below.</p>

In September, LG Chem Ltd (051910 KS) announced that it would split its Battery business (around 42% of total revenue) into a separate business. The plan was approved by a majority of shareholders on October 30th. By December 1st, the new battery business, tentatively named “LG Energy Solutions” will be formed.The second-largest shareholder - National Pension Service (NPS), with around a 10% stake, was against the split in business, citing a loss in shareholder value as a concern. Following the news, LG Chem’s share price dropped by about 6% during the day, however, the share price has recovered since then and has increased by 17.8% compared to the close on the 30th of October. We agree that the possible dilution in equity value should concern current shareholders. However, for the battery business as a whole, we feel that this is advantageous. The battery business will now receive the focus and attention it deserves, and given the current EV momentum, this could be the best strategy LG Chem could adopt to grow its battery business. During the first eight months of 2020, LG Chem also led the battery market, beating CATL (A) (300750 CH), which held the leading position until 2019. We believe that this a good time to split the battery business and that this should allow the new business to grow strongly and closely compete with pure EV battery leader CATL.We go through the details below.

LG Chem Battery Business Becomes a Separate Entity

South Korea

LG Chem Ltd. is a chemical manufacturer.  The Company's products include petrochemicals, plastic resins, and engineering plastics.  LG Chem also produces industrial and electronic materials.

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LG Chem Ltd (051910 KS)

LG Group Announces the Formation of LG NewCo & Split of 4 Companies from LG Corp

LG Group announced the creation of the LG NewCo, which we believe will have a positive impact on LG Corp. However, the overall positive impact is...

Douglas Kim

Tesla Rally Pushed LG Chem 1P Diversion to an Extreme: Trade σ Reversion & 1P Div

LG Chem's ord/1P diversion got pushed to an extreme by the late Tesla rally. Both sigma reversion and 1P dividend play deserve attention at this...

Sanghyun Park

LG Corp: Deep Value + 4 Key Catalysts

In this insight, we provide 4 key catalysts of LG Corp as well as an updated SoTP valuation analysis on the company. Our base case value suggests a...

Douglas Kim

Iljin Materials - IPO of Its 100% Owned Malaysian Subsidiary IMM Technology in 2021

The IPO listing of the IMM Technology Malaysian elecfoil business is likely to be a key positive catalyst for Iljin Materials over the next 6-12...

Douglas Kim

LG Chem Battery Business Becomes a Separate Entity

LG Chem receives a majority of shareholder approval to split its battery business into a separate business. This insight takes a look at our...

Aqila Ali

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