Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<ul>
<li>On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials. </li>
<li>Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.</li>
<li>We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years. </li>
</ul>


On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials. 
Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years. 


LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion

Equity Bottom-Up

<ul>
<li>After the market close on 16 June, it was reported in the local media that LG Chem is close to selling about 2 trillion won worth of LG Energy Solution.</li>
<li>This block deal sale is likely to pose overhang on more stake sales of LG Energy Solution (about 10% stake) in the next 3-5 years.</li>
<li>Our NAV valuation analysis of LG Chem suggests an implied price of 1,057,770 won per share, which is 41% higher than current share price.</li>
</ul>


After the market close on 16 June, it was reported in the local media that LG Chem is close to selling about 2 trillion won worth of LG Energy Solution.
This block deal sale is likely to pose overhang on more stake sales of LG Energy Solution (about 10% stake) in the next 3-5 years.
Our NAV valuation analysis of LG Chem suggests an implied price of 1,057,770 won per share, which is 41% higher than current share price.


LG Chem: Considering a Block Deal Sale of About 2 Trillion Won of LG Energy Solution: A Big Overhang

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

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

<ul>
<li>The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.</li>
<li>The commencement date for both the 5-year and 7-year bonds' exchange is August 28th.</li>
<li>We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.</li>
</ul>


The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.
The commencement date for both the 5-year and 7-year bonds' exchange is August 28th.
We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.


LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations

<ul>
<li>SKC Co Ltd (011790 KS) announced on 29 April that it plans to change into an intermediate holding company.</li>
<li>We believe that the formation of an intermediate holding company structure could have a negative impact on SKC's share price. </li>
<li>This is because some investors may be concerned that SKC may try to complete IPOs of some of its valuable subsidiaries including SKCFT Holdings without adequate protection for SKC shareholders.</li>
</ul>


SKC Co Ltd (011790 KS) announced on 29 April that it plans to change into an intermediate holding company.
We believe that the formation of an intermediate holding company structure could have a negative impact on SKC's share price. 
This is because some investors may be concerned that SKC may try to complete IPOs of some of its valuable subsidiaries including SKCFT Holdings without adequate protection for SKC shareholders.


SKC Co: Formation of an Intermediate Holding Company

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Quantitative Analysis

<ul>
<li>The 200 largest weighted companies in the GEM index reported average EPS growth of +6.3%y/y for 1Q23-to-date, slightly down from the +7.5% reported for 4Q22.</li>
<li>Only 51% of companies delivered positive sales surprises, whilst 60% delivered positive EPS surprises, an increase from the trend seen over the past year.</li>
<li>Historically, there has been a significant difference in relative share price performance between the largest positive versus negative surprise generators, for 3 months after the reporting date.</li>
</ul>


The 200 largest weighted companies in the GEM index reported average EPS growth of +6.3%y/y for 1Q23-to-date, slightly down from the +7.5% reported for 4Q22.
Only 51% of companies delivered positive sales surprises, whilst 60% delivered positive EPS surprises, an increase from the trend seen over the past year.
Historically, there has been a significant difference in relative share price performance between the largest positive versus negative surprise generators, for 3 months after the reporting date.


Global Emerging Markets: Reporting Season Summary, 1Q2023

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 Chem: To Issue Exchangeable Bonds Worth US$2 Billion

On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its...

Douglas Kim

LG Chem: Considering a Block Deal Sale of About 2 Trillion Won of LG Energy Solution: A Big Overhang

On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion (2.6 trillion won) to raise funds to...

Douglas Kim

LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations

This post details LG Chem's official ₩2.6T EB issuance with LG Energy ord shares as target assets and discusses trading considerations.

Sanghyun Park

SKC Co: Formation of an Intermediate Holding Company

This insight provides additional details of SKC which has announced highly aggressive investment plans to expand its rechargeable batteries and...

Douglas Kim

Global Emerging Markets: Reporting Season Summary, 1Q2023

In this quarterly insight, we analyse recent GEM reporting trends with reference to Sales and EPS growth, size and percentage of positive...

Wium Malan, CFA

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