Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Private Capital Markets

<div class="content-highlight">
<p><strong>Kakao Mobility is getting ready to complete its IPO in 1H 2022. The local media mentioned that the value of Kakao Mobility IPO could be as high as 7 trillion won to 8 trillion won next year.</strong></p>
<p>Kakao Mobility generated strong growth in sales from 2018 to 2020 when its sales increased by 129% CAGR. In 2020, the company generated sales of 280.1 billion won (up 167.1% YoY) and an operating loss of 13 billion won. The company's operating margin improved from -39.4% in 2018 to -21.1% in 2019 and -4.6% in 2020. </p>
<p>A valuation of 8 trillion won would suggest a P/S of 28.6x, using sales of 280.1 billion won in 2020, which is much higher than Uber's P/S of 8.1x (2020). However, Uber's sales declined by 21% YoY in 2020 whereas Kakao Mobility's sales increased by 167% YoY in 2020. </p>
</div>


Kakao Mobility is getting ready to complete its IPO in 1H 2022. The local media mentioned that the value of Kakao Mobility IPO could be as high as 7 trillion won to 8 trillion won next year.
Kakao Mobility generated strong growth in sales from 2018 to 2020 when its sales increased by 129% CAGR. In 2020, the company generated sales of 280.1 billion won (up 167.1% YoY) and an operating loss of 13 billion won. The company's operating margin improved from -39.4% in 2018 to -21.1% in 2019 and -4.6% in 2020. 
A valuation of 8 trillion won would suggest a P/S of 28.6x, using sales of 280.1 billion won in 2020, which is much higher than Uber's P/S of 8.1x (2020). However, Uber's sales declined by 21% YoY in 2020 whereas Kakao Mobility's sales increased by 167% YoY in 2020. 


Initial Thoughts on the Kakao Mobility IPO

Founder/CEO of ROK Advisory, ROK Advisory LLC

Ken S. Kim

Founder/CEO of ROK Advisory

ROK Advisory LLC

ROK is an independent research advisory firm. We guide you to minimize the information gap between foreign and local investors in Northeast Asia with a focus in Korea, Taiwan and Japan.

Independent Research Advisory Firm

Event-Driven

<p>is <a href="https://www.smartkarma.com/entities/lg-electronics-inc" target="_blank" data-smartkarma-citation="entities:8814:1" rel="noopener">LG Electronics (066570 KS)</a> overvalued or undervalued?   It depends on the what investors see as the right comps and given the current situation regards to <a href="https://www.smartkarma.com/entities/didi-chuxing-inc" target="_blank" data-smartkarma-citation="entities:27467:1" rel="noopener">DiDi Chuxing (DIDI US)</a> ,  there is a growing possibility that <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a> looks to diversify away from <a href="https://www.smartkarma.com/entities/hon-hai-precision-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:745:1" rel="noopener">Hon Hai Precision Industry (2317 TT)</a> sooner versus later. </p>

is LG Electronics (066570 KS) overvalued or undervalued?   It depends on the what investors see as the right comps and given the current situation regards to DiDi Chuxing (DIDI US) ,  there is a growing possibility that Apple Inc (AAPL US) looks to diversify away from Hon Hai Precision Industry (2317 TT) sooner versus later. 

Does LG Group Hold Leverage over Apple and Not the Other Way Around?

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.

<p>The last remaining step in the LG Group split is the exchange of shares between the major shareholders, as the largest shareholder of LX Holdings is still LG Group Chairman Koo Kwang-mo.</p><p>The stake exchange method is highly likely to be cross-trading through after-hours trading. This is the method used when the GS group was separated from the LG group. GS Group started to exchange shares one month after being separated from LG Group in 2004. Therefore, the market expects that the share exchange between LG and LX Holdings will also start in the not-too-distant future.</p><h2><strong>Then, the key is the difference in value that occurs during the exchange of shares.</strong></h2><p>The shares to be exchanged are an 8.32% stake in LG Holdings owned by LX Chairman Koo Bon-joon and his son and a 47.57% stake in LX Holdings owned by LG Chairman Koo Kwang-mo and other family members.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"Major shareholding"}'>Major shareholding</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>LG Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LX Holdings Corp"}' data-sheets-formula='=googlefinance(R[1]C[0], "name")'>LX Holdings Corp</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Market cap"}'>Market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16123.3517825}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]/1000000000">₩16,123.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":861.971797}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-2]C[0]*R[-1]C[0]/1000000000">₩862.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Koo Kwang-mo"}'>Koo Kwang-mo</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1595}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'>15.95%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.1595}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}'><strong>15.95%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Market value"}'>- Market value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2571.67460930875}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'>₩2,571.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":137.48450162150002}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'><strong>₩137.5B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"The other family members"}'>The other family members</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2162}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=45.89%-R[-2]C[0]-R[2]C[0]">21.62%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.2162}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=45.89%-R[-2]C[0]-R[2]C[0]"><strong>21.62%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Market value"}'>- Market value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":3485.8686553765}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'>₩3,485.9B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.3583025114}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'><strong>₩186.4B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Koo Bon-joon &amp; his son"}'>Koo Bon-joon &amp; his son</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0832}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=7.72%+0.6%"><strong>8.32%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.0832}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=7.72%+0.6%">8.32%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"- Market value"}'>- Market value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1341.462868304}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'><strong>₩1,341.5B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":71.7160535104}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(R2C[0], "shares")*googlefinance(R2C[0], "price")/1000000000*R[-1]C[0]'>₩71.7B</td>
</tr>
<tr><td colspan="3"><strong> </strong></td></tr>
<tr>
<td><strong>Swap target</strong></td>
<td style="text-align: right;"><strong>₩1,341.5B</strong></td>
<td style="text-align: right;"><strong>₩323.8B</strong></td>
</tr>
<tr><td colspan="3" data-sheets-value='{"1":2,"2":"Source: KRX FIND"}'>Source: KRX FIND</td></tr>
</tbody>
</table><p>These are ₩1,341.5B and ₩323.8B, respectively. The difference in value is ₩1,024.2B. According to the Fair Trade Act, LX Chairman Koo Bon-joon can hold less than 3% in LG Holdings. So, if Chairman Koo Bon-joon decides to hold a 3% stake in LG Holdings, the difference in value at the time of the exchange of shares will be ₩533.9B.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Koo Bon-joon needs to buy"}'>LX Holdings stake that Koo Bon-joon needs to buy</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Koo Kwang-mo"}'>Koo Kwang-mo</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":137.48450162150002}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-8]C[1]">₩137.5B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"The other family members"}'>The other family members</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":186.3583025114}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-7]C[1]">₩186.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Total"}'>- Total</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":323.8428041329}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=sum(R[-2]C[0]:R[-1]C[0])">₩323.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Difference"}'><strong>Difference</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1017.6200641711}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-7]C[0]-R[-1]C[0]"><strong>₩1,017.6B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - Keeping a 3% stake"}'><strong>Difference if keeps a 3% stake in LG Holdings</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":533.9195106960999}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=(R[-14]C[0]*(R[-9]C[0]-3%))-R[-2]C[0]"><strong>₩533.9B</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>

The last remaining step in the LG Group split is the exchange of shares between the major shareholders, as the largest shareholder of LX Holdings is still LG Group Chairman Koo Kwang-mo.The stake exchange method is highly likely to be cross-trading through after-hours trading. This is the method used when the GS group was separated from the LG group. GS Group started to exchange shares one month after being separated from LG Group in 2004. Therefore, the market expects that the share exchange between LG and LX Holdings will also start in the not-too-distant future.Then, the key is the difference in value that occurs during the exchange of shares.The shares to be exchanged are an 8.32% stake in LG Holdings owned by LX Chairman Koo Bon-joon and his son and a 47.57% stake in LX Holdings owned by LG Chairman Koo Kwang-mo and other family members.







Major shareholding
LG Corp
LX Holdings Corp


Market cap
₩16,123.4B
₩862.0B


Koo Kwang-mo
15.95%
15.95%


- Market value
₩2,571.7B
₩137.5B


The other family members
21.62%
21.62%


- Market value
₩3,485.9B
₩186.4B


Koo Bon-joon &amp; his son
8.32%
8.32%


- Market value
₩1,341.5B
₩71.7B

 

Swap target
₩1,341.5B
₩323.8B

Source: KRX FIND

These are ₩1,341.5B and ₩323.8B, respectively. The difference in value is ₩1,024.2B. According to the Fair Trade Act, LX Chairman Koo Bon-joon can hold less than 3% in LG Holdings. So, if Chairman Koo Bon-joon decides to hold a 3% stake in LG Holdings, the difference in value at the time of the exchange of shares will be ₩533.9B.





LX Holdings stake that Koo Bon-joon needs to buy

Koo Kwang-mo
₩137.5B


The other family members
₩186.4B


- Total
₩323.8B


Difference
₩1,017.6B


Difference if keeps a 3% stake in LG Holdings
₩533.9B

Source: KRX



LG Corp: Major Shareholder Stock Swap Situation Checkup

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

<p>In this insight, we discuss about the ways to think about and value the "core businesses" of LG Corp and Korean holding companies. These core businesses of the holdcos often include dividends, brand use fees, and rental income. We provide several scenarios in our analysis, in terms of different time frames, M&amp;As, and company splits. <strong>We use LG Corp as our main example. </strong></p><div class="content-highlight">
<p>Our updated valuation analysis of LG Corp suggests an implied NAV of 21.9 trillion won (139,192 won per share). This represents a 38.5% upside from current price. To value LG Corp, we used the current market value of its publicly listed stocks such as LG Chem and LG H&amp;H. </p>
<p>From 19 November 2020 to 1 June 2021, the biggest difference is LG Corp's stake in LG Electronics which rose to 8.4 trillion won (as of 1 June 2021), up 70% from 19 November 2020. LX Holdings related entities including LX International, Hausys, and Silicon Works are no longer included. We have also applied a 50% holdco discount to value LG Corp. </p>
</div>

In this insight, we discuss about the ways to think about and value the "core businesses" of LG Corp and Korean holding companies. These core businesses of the holdcos often include dividends, brand use fees, and rental income. We provide several scenarios in our analysis, in terms of different time frames, M&amp;As, and company splits. We use LG Corp as our main example. 
Our updated valuation analysis of LG Corp suggests an implied NAV of 21.9 trillion won (139,192 won per share). This represents a 38.5% upside from current price. To value LG Corp, we used the current market value of its publicly listed stocks such as LG Chem and LG H&amp;H. 
From 19 November 2020 to 1 June 2021, the biggest difference is LG Corp's stake in LG Electronics which rose to 8.4 trillion won (as of 1 June 2021), up 70% from 19 November 2020. LX Holdings related entities including LX International, Hausys, and Silicon Works are no longer included. We have also applied a 50% holdco discount to value LG Corp. 


How to Think About & Value "Core Busineses" Of LG Corp & Korean Holdcos

South Korea

LG Corp. is a holding company, which operates subsidiaries including LG Electronics, LG Household & Health Care, LG Chem Ltd., and Dacom Corp. The Company's main business areas are electronics, chemicals, and household products manufacturing and telecommunications services.

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LG Corp (003550 KS)

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How to Think About & Value "Core Busineses" Of LG Corp & Korean Holdcos

In this insight, we discuss about the ways to think about and value the "core businesses" of LG Corp and Korean holding companies. We also provide...

Douglas Kim

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