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

<p>LG Corp is currently in trade suspension. It will resume trading on May 27.</p><table class="table table-striped">
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<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Corporate action schedule"}'>LG Corp (003550) spinoff schedule</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspension begins"}'>Trade suspension begins</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"4/29/21"}'>4/29/21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Trade suspensino ends"}'>Trade suspension ends</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"5/26/21"}'>5/26/21</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Re-listing"}'><strong>Re-listing</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"5/27/21"}'><strong>5/27/21</strong></td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><div><p>The re-listing day base price is calculated as follows:</p></div><div><div><ul>
<li>Base price: (Market cap on the last trading day X Split ratio) / total shares</li>
<li>Opening price band: 50% &lt; Base price &lt; 200%</li>
</ul></div></div><div>
<p><strong>At the current market cap, LG Corp's base price comes at ₩126,500, giving a ₩19.90T market cap. LX Holdings' base price arrives at ₩25,300 with a ₩1.93T market cap.</strong></p>
<table class="table table-striped">
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<col width="100">
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<tbody>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"Re-listing day base price calculation"}'>Re-listing day base price calculation</td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":2,"2":"LG Corp"}'>LG Corp</td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":2,"2":"LX Holdings"}'>LX Holdings</td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"Last trading day MC"}'>Combined market cap on the last trading day</td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":21828.4770715}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(Table!R3C2, "price")*googlefinance(Table!R3C2, "shares")/1000000000'>₩21,828.5B</td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":21828.4770715}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula='=googlefinance(Table!R3C2, "price")*googlefinance(Table!R3C2, "shares")/1000000000'>₩21,828.5B</td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"LG Corp split ratio"}'><strong>Split ratio</strong></td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":0.9115879}' data-sheets-formula="=R[13]C[-4]"><strong>0.9115879</strong></td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":0.0884121}' data-sheets-formula="=R[13]C[-4]"><strong>0.0884121</strong></td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"LG Corp SO"}'>Total shares</td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":157300992.6783149}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=NAV!R[-1]C[1]">157,300,993</td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":76280691.6084255}' data-sheets-numberformat='{"1":2,"2":"#,##0","3":1}' data-sheets-formula="=NAV!R[-1]C[6]">76,280,692</td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"LG Corp base price"}'><strong>Base price</strong></td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":126500.00000000001}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}' data-sheets-formula="=R[-3]C[0]*R[-2]C[0]/R[-1]C[0]*1000000000"><strong>₩126,500</strong></td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":25300}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}' data-sheets-formula="=R[-3]C[0]*R[-2]C[0]/R[-1]C[0]*1000000000"><strong>₩25,300</strong></td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"- Market cap"}'><strong>- Market cap</strong></td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":19898.575573806836}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*R4C[0]/1000000000"><strong>₩19,898.6B</strong></td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":1929.901497693165}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*R4C[0]/1000000000"><strong>₩1,929.9B</strong></td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"Opening price at 50%"}'>Opening price at 50%</td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":63250.00000000001}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}' data-sheets-formula="=R[-2]C[0]/2">₩63,250</td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":12650}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}' data-sheets-formula="=R[-2]C[0]/2">₩12,650</td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"- Market cap"}'>- Market cap</td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":9949.287786903418}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*R4C[0]/1000000000">₩9,949.3B</td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":964.9507488465825}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*R4C[0]/1000000000">₩965.0B</td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"Opening price at 200%"}'>Opening price at 200%</td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":253000.00000000003}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}' data-sheets-formula="=R[-4]C[0]*2">₩253,000</td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":50600}' data-sheets-numberformat='{"1":4,"2":"[$₩-412]#,##0"}' data-sheets-formula="=R[-4]C[0]*2">₩50,600</td>
</tr>
<tr>
<td style="width: 253.636px;" data-sheets-value='{"1":2,"2":"- Market cap"}'>- Market cap</td>
<td style="text-align: right; width: 214.545px;" data-sheets-value='{"1":3,"3":39797.15114761367}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*R4C[0]/1000000000">₩39,797.2B</td>
<td style="text-align: right; width: 213.636px;" data-sheets-value='{"1":3,"3":3859.80299538633}' data-sheets-numberformat='{"1":2,"2":"₩#,##0.0B"}' data-sheets-formula="=R[-1]C[0]*R4C[0]/1000000000">₩3,859.8B</td>
</tr>
<tr><td colspan="3" rowspan="1" style="width: 723.636px;" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table>
</div><hr><h2><strong>Pre-spinoff NAV</strong></h2><p><strong>The last closing price before the suspension kicked in on April 29 gives a 52.41% discount to its NAV.</strong> It is still a harsh discount, but at the same time, it is a substantial improvement from a +60% NAV discount not that long ago.</p><table class="table table-striped">
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<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"NAV (₩B)"}' data-sheets-note="Sang Hyun Park: Cases when a company's net cash position and the value of its publically traded interests are worth more than its market cap create the opportunity of a stub trade, in which investors can take a view that the company's core business will rise by shorting the minority stakes whilst going long the underlying. Such an opportunity has arisen in the wake of the Alibaba listing which has seen early investing company Yahoo trade at a discount to the value of its stake in Alibaba.">Pre-spinoff NAV (₩B)</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of listed holdings"}'>Value of listed holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":41626.31228257122}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula="=SUM(R[34]C[2]:R[42]C[2])">₩41,626.3B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of Holdco market cap"}'>- % of Holdco market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.9069728110771385}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[-1]C[0]/((R[-12]C[0]*R[-15]C[0])/1000000000)">190.70%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of unlisted holdings"}'>Value of unlisted holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2631.699}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula="=SUM(R[41]C[2]:R[42]C[2])">₩2,631.7B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value"}'>Stub value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-22429.53421107122}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula="=(R[-14]C[0]*R[-17]C[0]/1000000000)-R[-3]C[0]-R[-1]C[0]">-₩22,429.5₩</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value per share"}'>Stub value per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-129983.23558747172}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*1000000000/R[-18]C[0]">-₩129,983</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of operating assets"}'>Value of operating assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula="=SUM(R[60]C[2])">0.0</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV"}'><strong>GAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":44258.01128257122}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula="=R[-6]C[0]+R[-4]C[0]+R[-1]C[0]"><strong>₩44,258.0B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV per share"}'>GAV per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":256483.23558747175}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-11]C[0]*1000000000">₩256,483</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to GAV (excl. treasury shares)"}'>Discount to GAV (excl. treasury shares)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5067903767267545}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-19]C[0])/R[-1]C[0]">50.68%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (de-consolidated)"}'>Holdco net cash/debt</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1941.8010390000002}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula="=R[57]C[2]">₩1,941.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}'>Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":329.8103615}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula="=(R[-20]C[0]*R[-17]C[0])/1000000000">₩329.8B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV"}'><strong>NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":45870.00196007122}' data-sheets-numberformat='[null,2,"#,##0.0"]' data-sheets-formula="=R[-5]C[0]+R[-2]C[0]-R[-1]C[0]"><strong>₩45,870.0B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV per share (excl. treasury shares)"}'>NAV per share (excl. treasury shares)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":265825.0151369938}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-16]C[0]*1000000000">₩265,825</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to NAV"}'><strong>Discount to NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5241230403586817}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-24]C[0])/R[-1]C[0]"><strong>52.41%</strong></td>
</tr>
<tr><td colspan="2" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART","6":1}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table>

LG Corp is currently in trade suspension. It will resume trading on May 27.





LG Corp (003550) spinoff schedule

Trade suspension begins
4/29/21


Trade suspension ends
5/26/21


Re-listing
5/27/21

Source: KRX

The re-listing day base price is calculated as follows:
Base price: (Market cap on the last trading day X Split ratio) / total shares
Opening price band: 50% &lt; Base price &lt; 200%

At the current market cap, LG Corp's base price comes at ₩126,500, giving a ₩19.90T market cap. LX Holdings' base price arrives at ₩25,300 with a ₩1.93T market cap.








Re-listing day base price calculation
LG Corp
LX Holdings


Combined market cap on the last trading day
₩21,828.5B
₩21,828.5B


Split ratio
0.9115879
0.0884121


Total shares
157,300,993
76,280,692


Base price
₩126,500
₩25,300


- Market cap
₩19,898.6B
₩1,929.9B


Opening price at 50%
₩63,250
₩12,650


- Market cap
₩9,949.3B
₩965.0B


Opening price at 200%
₩253,000
₩50,600


- Market cap
₩39,797.2B
₩3,859.8B

Source: KRX


Pre-spinoff NAVThe last closing price before the suspension kicked in on April 29 gives a 52.41% discount to its NAV. It is still a harsh discount, but at the same time, it is a substantial improvement from a +60% NAV discount not that long ago.





Pre-spinoff NAV (₩B)

Value of listed holdings
₩41,626.3B


- % of Holdco market cap
190.70%


Value of unlisted holdings
₩2,631.7B


Stub value
-₩22,429.5₩


Stub value per share
-₩129,983


Value of operating assets
0.0


GAV
₩44,258.0B


GAV per share
₩256,483


Discount to GAV (excl. treasury shares)
50.68%


Holdco net cash/debt
₩1,941.8B


Value of pref shares
₩329.8B


NAV
₩45,870.0B


NAV per share (excl. treasury shares)
₩265,825


Discount to NAV
52.41%

Source: KRX &amp; DART



LG Holdings Post-Spinoff NAV Discounts & Stub Synthetic Pair Trading

<p>We know that the Korea National Pension Service (NPS) is the nation's largest institutional investor, responsible for about 7% of the local equity market. But we often overlook the fact that it is also one of the largest institutional investors in the global coal industry.</p><p>According to the joint report by several environmental organizations, including Urgewald and Reclaim France, the NPS is, in fact, the world's 11th-largest investor in the coal industry. The NPS currently invests ₩12.7T in total on the coal-related bonds and equity, of which ₩4T are invested in equity.</p><p>There is news that the NPS will introduce a negative screening on the coal investment as early as the second half of this year.</p><p>The upcoming Fund Management Committee meeting, chaired by the Minister of Health and Welfare of South Korea, is scheduled for April 30. It is the highest-level investment decision-making body within the NPS. The negative screening is officially one of the proposals to be discussed in the April 30 meeting.</p><p style="text-align: center;"><strong>The Korea NPS governance structure</strong></p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/203/038/original/1.png?1619531424" class="editor-image img-responsive" data-smartkarma-image-id="203038"></figure></section><div class="content-caption">(Courtesy Korea NPS)</div><p>The chances are pretty high, given the current political mood under the left-winged administration. Coal will be a starter, likely followed by tobacco and mass destruction weapons soon.</p>

We know that the Korea National Pension Service (NPS) is the nation's largest institutional investor, responsible for about 7% of the local equity market. But we often overlook the fact that it is also one of the largest institutional investors in the global coal industry.According to the joint report by several environmental organizations, including Urgewald and Reclaim France, the NPS is, in fact, the world's 11th-largest investor in the coal industry. The NPS currently invests ₩12.7T in total on the coal-related bonds and equity, of which ₩4T are invested in equity.There is news that the NPS will introduce a negative screening on the coal investment as early as the second half of this year.The upcoming Fund Management Committee meeting, chaired by the Minister of Health and Welfare of South Korea, is scheduled for April 30. It is the highest-level investment decision-making body within the NPS. The negative screening is officially one of the proposals to be discussed in the April 30 meeting.The Korea NPS governance structure(Courtesy Korea NPS)The chances are pretty high, given the current political mood under the left-winged administration. Coal will be a starter, likely followed by tobacco and mass destruction weapons soon.

Shorting Alert Amid Korea NPS Negative Screening on Coal: KEPCO, GS, OCI, Kumho P, LG Int, & POSCO

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

<p>It seems to be spin-off season in Korea.</p><p>Three <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> and <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> constituents will be suspended from trading from 29 April - <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a>, <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a> and <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a> due to a spin-off of its businesses.</p><p><a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a> will resume trading on 21 May, <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> will resume trading on 27 May, and <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a> will resume trading on 28 May.</p><p><a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> will remain in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> and its spinoff will be added to the index, <a href="https://www.smartkarma.com/entities/f-f-co-ltd" target="_blank" data-smartkarma-citation="entities:15983:1" rel="noopener">F&amp;F Co Ltd (007700 KS)</a> will remain in the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a> but the spinoff will not be added to the index, <a href="https://www.smartkarma.com/entities/ecopro-co-ltd" target="_blank" data-smartkarma-citation="entities:19029:1" rel="noopener">Ecopro Co Ltd (086520 KS)</a> will continue to be a <a href="https://www.smartkarma.com/entities/kosdaq-150-index" target="_blank" data-smartkarma-citation="entities:31077:1" rel="noopener">KOSDAQ 150 Index (KOSDQ150 INDEX)</a> constituent though its spinoff will not be included in the index.</p><p>In this Insight, we look at the index treatment, the impact of passive flow on the stocks, and the impact of the changes on the June rebalance of the <a href="https://www.smartkarma.com/entities/korea-stock-exchange-kospi-200-index" target="_blank" data-smartkarma-citation="entities:26021:1" rel="noopener">Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX)</a>. </p>

It seems to be spin-off season in Korea.Three Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) constituents will be suspended from trading from 29 April - LG Corp (003550 KS), F&amp;F Co Ltd (007700 KS) and Ecopro Co Ltd (086520 KS) due to a spin-off of its businesses.F&amp;F Co Ltd (007700 KS) will resume trading on 21 May, LG Corp (003550 KS) will resume trading on 27 May, and Ecopro Co Ltd (086520 KS) will resume trading on 28 May.LG Corp (003550 KS) will remain in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and its spinoff will be added to the index, F&amp;F Co Ltd (007700 KS) will remain in the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) but the spinoff will not be added to the index, Ecopro Co Ltd (086520 KS) will continue to be a KOSDAQ 150 Index (KOSDQ150 INDEX) constituent though its spinoff will not be included in the index.In this Insight, we look at the index treatment, the impact of passive flow on the stocks, and the impact of the changes on the June rebalance of the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX). 

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

<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

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 


South Korea

LX International is a commodity trading and mining company.  The Company develops and trades coal, oil, gas, non-ferrous metals, palm oil, and renewable energy. LG International also trades IT related component/equipment, petrochemical and steel product.

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LX International (001120 KS)

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