Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight"><p><a href="https://www.reuters.com/article/lg-energy-solution-ipo/update-3-lg-energy-moves-ahead-on-skorea-ipo-that-ifr-says-may-raise-10-12-bln-idUSL2N2NQ0HI" target="_blank" rel="noopener">LG Energy Solution</a> is getting ready for an IPO in Korea in 2H 2021. LG Energy Solution is expected to be the largest IPO in Korea this year. It is expected that LG Energy Solution (LGES) could raise $10 billion to $12 billion, which would be the biggest ever IPO offering in Korea. The biggest ever IPO (in terms of amount raised) in Korea was Samsung Life IPO when it raised $4.4 billion in 2010. <a href="https://www.smartkarma.com/entities/coupang" target="_blank" data-smartkarma-citation="entities:28425:1" rel="noopener">Coupang (CPNG US)</a> recently raised $4.6 billion in the United States this year. </p></div>

LG Energy Solution is getting ready for an IPO in Korea in 2H 2021. LG Energy Solution is expected to be the largest IPO in Korea this year. It is expected that LG Energy Solution (LGES) could raise $10 billion to $12 billion, which would be the biggest ever IPO offering in Korea. The biggest ever IPO (in terms of amount raised) in Korea was Samsung Life IPO when it raised $4.4 billion in 2010. Coupang (CPNG US) recently raised $4.6 billion in the United States this year. 

Initial Thoughts on the LG Energy Solution IPO

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>In last week's <em>Compass</em> we highlighted what we view as compelling signals that risk appetites are improving, which is bullish for the broad market. The trend of improving risk appetites has only continued over the past week and we are moving toward an outright bullish outlook.</p>

In last week's Compass we highlighted what we view as compelling signals that risk appetites are improving, which is bullish for the broad market. The trend of improving risk appetites has only continued over the past week and we are moving toward an outright bullish outlook.

U.S. Equity Strategy: Small-Caps Re-Emerging As Leadership

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

<p>Nexteer's share price was plagued by the auto chip shortage that causes its share price to fall from HKD 14to 7, a fall of 50% in the span of 3 months, presenting an excellent opportunity to add or initiate a position in the portfolio due to 1) the ending of the chip shortage is near thus auto-related stocks will benefit from the positive sentiment thus multiples will be higher and 2) the management has confirmed that 2H 2021 will have much bigger revenue <strong>(around 9x)</strong> although the reality could be different, nevertheless, it presents growth potential for <a href="https://www.smartkarma.com/entities/nexteer-automotive-group-ltd" target="_blank" data-smartkarma-citation="entities:15483:1" rel="noopener">Nexteer Automotive (1316 HK)</a> .</p>

Nexteer's share price was plagued by the auto chip shortage that causes its share price to fall from HKD 14to 7, a fall of 50% in the span of 3 months, presenting an excellent opportunity to add or initiate a position in the portfolio due to 1) the ending of the chip shortage is near thus auto-related stocks will benefit from the positive sentiment thus multiples will be higher and 2) the management has confirmed that 2H 2021 will have much bigger revenue (around 9x) although the reality could be different, nevertheless, it presents growth potential for Nexteer Automotive (1316 HK) .

Nexteer (1316): Positive Sentiment and Exciting 2H 2021

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>In a cyclical and volatile commodity sector, such as lithium, profitability is key during lean times.</p>
<p>Brisbane-based <a href="https://www.smartkarma.com/entities/orocobre-ltd" target="_blank" data-smartkarma-citation="entities:3572:1" rel="noopener">Orocobre Ltd (ORE AU)</a> and Perth-based <a href="https://www.smartkarma.com/entities/galaxy-resources-ltd" target="_blank" data-smartkarma-citation="entities:13914:1" rel="noopener">Galaxy Resources (GXY AU)</a> are in effect, the poster children for Aussie-listed lithium producers.  Orocobre extracts the commodity from Argentinian brine ponds, and Galaxy from Western Australian rock. Two different lithium products in two different jurisdictions.</p>
<p>Amid a downturn in the price of the battery commodity and a reduction in tonnes exported, both Galaxy and Orocobre splashed red ink in <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02205130-6A969035?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">FY19</a> (Dec-end) and <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02273544-2A1246100?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">FY20</a> (June-end) respectively.</p>
<p>The downturn resulted in <a href="https://www.smartkarma.com/entities/alita-resources-ltd" target="_blank" data-smartkarma-citation="entities:16331:1" rel="noopener">Alita Resources (AMS SP)</a> - in which Galaxy is a shareholder - going into administration, a situation that is still working its way through the <a href="https://www.miningweekly.com/article/galaxy-joins-the-fight-for-bald-hill-2021-02-12" target="_blank" rel="noopener">sale of asset process</a>. In addition, <a href="https://www.smartkarma.com/entities/pilbara-minerals-ltd" target="_blank" data-smartkarma-citation="entities:7460:1" rel="noopener">Pilbara Minerals (PLS AU)</a> acquired <a href="https://www.smartkarma.com/entities/altura-mining-ltd" target="_blank" data-smartkarma-citation="entities:13385:1" rel="noopener">Altura Mining (AJM AU)</a> late last year after the latter entered receivership in November as the raw battery materials market nose-dived.</p>
<p>A reversal of fortunes has seen increased demand, and price, for Galaxy's spodumene concentrate, and Orocobre's Argentinian lithium bicarbonate. In its quarterly update on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02362944-2A1292351?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">13 April</a>, Orocobre said pricing was up more than 50% since the Dec-20 quarter, and nearly 90% in the last six months. </p>
<h3>The NEW News</h3>
<p>After circling each other for a couple of years, Galaxy and Orocobre entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02364542-2A1293132?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">binding agreement</a> earlier this week under which the two companies will merge via a Galaxy Scheme, following which, Orocobre will hold 100% in Galaxy.</p>
<p>Galaxy shareholders will receive 0.569 Orocobre shares for each Galaxy share. Upon implementation, Orocobre shareholders will own 54.2% of the enlarged entity, and Galaxy shareholders will own the remaining 45.8%.</p>
<p>The A$4bn combined entity will be the fifth-largest lithium producer - and third-largest outside of China - boasting a diversified product base via four producing assets.</p>
<p>The two companies classify this as a merger of equals, and in many respects it is. Each company will appoint four directors to the new nine-person board, and the chairman and deputy chairman’s jobs for the coming 12 months will be split down the middle until replacements are found.</p>
<p>This is an intelligent merger. Not only does it establish a foothold in South American brines and Western Australian/North American spodumene, something the world’s largest lithium producers seek to achieve, the new entity will be better positioned to weather a material correction in lithium prices.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/201/665/original/image_29076439221618885833728.png?1618885835" class="editor-image img-responsive" data-smartkarma-image-id="201665"></figure>

In a cyclical and volatile commodity sector, such as lithium, profitability is key during lean times.
Brisbane-based Orocobre Ltd (ORE AU) and Perth-based Galaxy Resources (GXY AU) are in effect, the poster children for Aussie-listed lithium producers.  Orocobre extracts the commodity from Argentinian brine ponds, and Galaxy from Western Australian rock. Two different lithium products in two different jurisdictions.
Amid a downturn in the price of the battery commodity and a reduction in tonnes exported, both Galaxy and Orocobre splashed red ink in FY19 (Dec-end) and FY20 (June-end) respectively.
The downturn resulted in Alita Resources (AMS SP) - in which Galaxy is a shareholder - going into administration, a situation that is still working its way through the sale of asset process. In addition, Pilbara Minerals (PLS AU) acquired Altura Mining (AJM AU) late last year after the latter entered receivership in November as the raw battery materials market nose-dived.
A reversal of fortunes has seen increased demand, and price, for Galaxy's spodumene concentrate, and Orocobre's Argentinian lithium bicarbonate. In its quarterly update on the 13 April, Orocobre said pricing was up more than 50% since the Dec-20 quarter, and nearly 90% in the last six months. 
The NEW News
After circling each other for a couple of years, Galaxy and Orocobre entered into a binding agreement earlier this week under which the two companies will merge via a Galaxy Scheme, following which, Orocobre will hold 100% in Galaxy.
Galaxy shareholders will receive 0.569 Orocobre shares for each Galaxy share. Upon implementation, Orocobre shareholders will own 54.2% of the enlarged entity, and Galaxy shareholders will own the remaining 45.8%.
The A$4bn combined entity will be the fifth-largest lithium producer - and third-largest outside of China - boasting a diversified product base via four producing assets.
The two companies classify this as a merger of equals, and in many respects it is. Each company will appoint four directors to the new nine-person board, and the chairman and deputy chairman’s jobs for the coming 12 months will be split down the middle until replacements are found.
This is an intelligent merger. Not only does it establish a foothold in South American brines and Western Australian/North American spodumene, something the world’s largest lithium producers seek to achieve, the new entity will be better positioned to weather a material correction in lithium prices.


<p>BYD's battery business has always been less meaningful compared to the automobile and mobile handset business (which investors can access through <a href="https://www.smartkarma.com/entities/byd-electronic-international-co-ltd" target="_blank" data-smartkarma-citation="entities:1927:1" rel="noopener">BYD Electronics (285 HK)</a>), but the long-term prospect has always been exciting. The recent BYD's Blade battery perks a positive rumor that the company will be able to sell in-vehicle batteries to other EV makers, increasing the group's EBITDA by almost 40% depending on the various scenarios. Investors should be even more excited at the prospect that BYD's battery business can finally contribute to the group's more meaningfully. </p>
<div class="content-highlight">
<p>Compared to other EV players such as <a href="https://www.smartkarma.com/entities/tesla-motors-inc" target="_blank" data-smartkarma-citation="entities:20279:1" rel="noopener">Tesla Motors (TSLA US)</a> , <a href="https://www.smartkarma.com/entities/nio-inc" target="_blank" data-smartkarma-citation="entities:27399:1" rel="noopener">NIO Inc (NIO US)</a> and <a href="https://www.smartkarma.com/entities/xpeng-inc" target="_blank" data-smartkarma-citation="entities:29217:1" rel="noopener">Xpeng (XPEV US)</a> , BYD is trading at 22% PER discount, 32% EV/EBITDA discount, and 22% PBR discount whilst against <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> and <a href="https://www.smartkarma.com/entities/samsung-sdi-co-ltd" target="_blank" data-smartkarma-citation="entities:503:1" rel="noopener">Samsung SDI (006400 KS)</a> , BYD is trading at 154% PER premium, 61% EV/EBITDA discount and 6% PBR discount. From cash flow multiples (EV/EBITDA), BYD is undervalued compared to the other EV players and battery suppliers. </p>
</div>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/199/873/original/image_90672331821618121444881.png?1618121444" class="editor-image img-responsive" data-smartkarma-image-id="199873"></figure>
<div class="content-remarks">
<p>source: Reuters</p>
</div>

BYD's battery business has always been less meaningful compared to the automobile and mobile handset business (which investors can access through BYD Electronics (285 HK)), but the long-term prospect has always been exciting. The recent BYD's Blade battery perks a positive rumor that the company will be able to sell in-vehicle batteries to other EV makers, increasing the group's EBITDA by almost 40% depending on the various scenarios. Investors should be even more excited at the prospect that BYD's battery business can finally contribute to the group's more meaningfully. 

Compared to other EV players such as Tesla Motors (TSLA US) , NIO Inc (NIO US) and Xpeng (XPEV US) , BYD is trading at 22% PER discount, 32% EV/EBITDA discount, and 22% PBR discount whilst against CATL (A) (300750 CH) and Samsung SDI (006400 KS) , BYD is trading at 154% PER premium, 61% EV/EBITDA discount and 6% PBR discount. From cash flow multiples (EV/EBITDA), BYD is undervalued compared to the other EV players and battery suppliers. 



source: Reuters


BYD (1211): In-Vehicle Batteries to Power Growth

United States

General Motors Co. manufactures and markets new cars and trucks. The Company offers features for special needs drivers, OnStar vehicle protection, service, parts, accessories, maintenance, XM satellite radio, features for commercial owners, and more. General Motors offers its vehicles and services worldwide.

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General Motors (GM US)

Initial Thoughts on the LG Energy Solution IPO

LG Energy Solution is getting ready for an IPO in Korea in 2H 2021. LG Energy Solution is expected to be the largest IPO in Korea this year.

Douglas Kim

U.S. Equity Strategy: Small-Caps Re-Emerging As Leadership

We continue to see compelling signals that suggest risk appetites are improving, which is bullish for the broad market. As a result, we are moving...

Vermilion Research

Nexteer (1316): Positive Sentiment and Exciting 2H 2021

Nexteer's share price was plagued by the auto chip shortage as its share price fell 50% in the span of 3 months, presenting an excellent...

Henry Soediarko

Orocobre/Galaxy Resources: On A Charge

The merged entity will capture a greater market share of the lithium supply in coming years, and capitalise on mining synergies. Plus afford the...

David Blennerhassett

BYD (1211): In-Vehicle Batteries to Power Growth

BYD's Blade battery perks a positive rumor that the company will be able to sell in-vehicle batteries to other EVs, increasing the group's EBITDA...

Henry Soediarko

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