Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>On 25 October, we recommended a pair trade between LG Chem (go long) and LGES (go short). Since then, this trade has resulted in a net gain of 15.7%.</li>
<li>It is very unusual to get this kind of alpha sized gains on Korean large caps in such a short time period. </li>
<li>Given the sharp net appreciation on this pair trade in the past week, we would close out this trade. </li>
</ul>


On 25 October, we recommended a pair trade between LG Chem (go long) and LGES (go short). Since then, this trade has resulted in a net gain of 15.7%.
It is very unusual to get this kind of alpha sized gains on Korean large caps in such a short time period. 
Given the sharp net appreciation on this pair trade in the past week, we would close out this trade. 


Close Out the Pair Trade Between LG Chem & LG Energy Solution

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.

Event-Driven

<ul>
<li>Despite the WATCH list's confusion, LG Energy Solution replaced LG Chem. In addition, Solactive excluded Iljin Materials, evidently due to its float-adjusted market cap size.</li>
<li>There are some somewhat elusive additions. The most prominent example is Japan Steel Works, which replaced LG Chem in the updated WATCH list at the last minute.</li>
<li>There was confusion about LG Chem's deletion until the last minute, so, likely, the market has not sufficiently reflected this rebalancing factor in LG Energy/LG Chem's LONG/SHORT.</li>
</ul>


Despite the WATCH list's confusion, LG Energy Solution replaced LG Chem. In addition, Solactive excluded Iljin Materials, evidently due to its float-adjusted market cap size.
There are some somewhat elusive additions. The most prominent example is Japan Steel Works, which replaced LG Chem in the updated WATCH list at the last minute.
There was confusion about LG Chem's deletion until the last minute, so, likely, the market has not sufficiently reflected this rebalancing factor in LG Energy/LG Chem's LONG/SHORT.


Solactive Lithium Review Results Out: Key Takeaways

<ul>
<li>Although Lionheart Studio announced that it will cancel its IPO this year, it is highly likely that the company will complete its IPO by 1H 2023.</li>
<li>If Lionheart Studio does not proceed with an IPO, Kakao Games has to pay to Lionheart CEO Kim Jae-Young and other major shareholders as much as 1.2 trillion won.</li>
<li>We would argue that Kakao Games' earnings estimates are overly aggressive and there is a strong likelihood of 30%+ earnings downgrade for Kakao Games by the consensus in 2023.</li>
</ul>


Although Lionheart Studio announced that it will cancel its IPO this year, it is highly likely that the company will complete its IPO by 1H 2023.
If Lionheart Studio does not proceed with an IPO, Kakao Games has to pay to Lionheart CEO Kim Jae-Young and other major shareholders as much as 1.2 trillion won.
We would argue that Kakao Games' earnings estimates are overly aggressive and there is a strong likelihood of 30%+ earnings downgrade for Kakao Games by the consensus in 2023.


Kakao Games: Further Downside Risk as IPO of Lionheart Studio Likely in 1H 2023

<ul>
<li>LG Chem's deletion is almost a done deal. The pouch-type pack goes to LG Energy, and the cathode business is not big enough to beat L&amp;F.</li>
<li>Chunbo is an additive field that this index has not included so far. So, Chunbo will be added as a new addition rather than replacing someone else.</li>
<li>SK IE Tech is quite tricky. The key is to see separator and elecfoil as the same field. If so, SK IET is likely to replace Iljin Materials.</li>
</ul>


LG Chem's deletion is almost a done deal. The pouch-type pack goes to LG Energy, and the cathode business is not big enough to beat L&amp;F.
Chunbo is an additive field that this index has not included so far. So, Chunbo will be added as a new addition rather than replacing someone else.
SK IE Tech is quite tricky. The key is to see separator and elecfoil as the same field. If so, SK IET is likely to replace Iljin Materials.


Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement

<ul>
<li>In this insight, we discuss a pair trade between LG Corp (003550 KS) (go long) and LG Electronics (066570 KS) (go short).</li>
<li>LG Electronics is likely to have continued weakening results, due to rising interest rates on the household disposable income in major countries.</li>
<li>Our base case valuation analysis of LG Corp suggests an implied price of 93,905 won per share, representing 19% upside from current levels.</li>
</ul>


In this insight, we discuss a pair trade between LG Corp (003550 KS) (go long) and LG Electronics (066570 KS) (go short).
LG Electronics is likely to have continued weakening results, due to rising interest rates on the household disposable income in major countries.
Our base case valuation analysis of LG Corp suggests an implied price of 93,905 won per share, representing 19% upside from current levels.


A Pair Trade Between LG Corp & LG Electronics

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)

Close Out the Pair Trade Between LG Chem & LG Energy Solution

On 25 October, we recommended a pair trade between LG Chem (go long) and LGES (go short). Since then, this trade has resulted in a net gain of...

Douglas Kim

Solactive Lithium Review Results Out: Key Takeaways

This post details the review results of the Solactive Global Lithium Index and discusses key takeaways for trading setups.

Sanghyun Park

Kakao Games: Further Downside Risk as IPO of Lionheart Studio Likely in 1H 2023

We would argue that Kakao Games' earnings estimates are overly aggressive and there is a strong likelihood of 30%+ earnings downgrade for Kakao...

Douglas Kim

Solactive Lithium Index Rebalancing: Noteworthy Names in Korea Before the Announcement

This post discusses the notable Korean stocks in the upcoming rebalancing of the Solactive Lithium Index (Global X ETF: LIT).

Sanghyun Park

A Pair Trade Between LG Corp & LG Electronics

In this insight, we discuss a pair trade between LG Corp (003550 KS) (go long) and LG Electronics (066570 KS) (go short).

Douglas Kim

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