Daily Brief Energy/Materials: Lotte Chemical, Crude Oil, iShares Micro-Cap ETF and more

In today’s briefing:

Lotte Chemical Close to Acquiring Iljin Materials
Bloomberg Commodity Index Breaks 2.5-Year Uptrend; Key Indexes/Sectors Testing Support at YTD Lows
Summers Value Partners Q2 2022 Investor Letter

Lotte Chemical Close to Acquiring Iljin Materials

On 27 September, it was announced that Lotte Chemical (011170 KS) is close to acquiring a 53.3% stake in Iljin Materials (020150 KS) for about 2.7 trillion won (US$1.9 billion).
Iljin Materials has relatively high valuation multiples. Despite recent share price decline, its shares are trading at 32.4x P/E and 15.7x EV/EBITDA in 2022.
At such a high valuation premium (93% higher than current prices), there are going to be significant concerns that Lotte Chem may have overpaid for this acquisition.

In last week’s Macro Vision report, we noted breaks below 3900 on the SPX and $293 on the QQQ opened the door for a test of YTD lows, or worse.
We are now getting a test of the YTD lows of 3636 on the S&P 500 and $269 on QQQ
With so many indexes and key Sectors currently oversold and testing support, we could certainly see a bounce/pause at current levels.

Summers Value Partners is a boutique value manager that uses a focused, long-term approach to investing in areas of the market where most managers are unwilling or unable to participate.
The Summers Value Fund LP (“the Fund”) returned -25.9% net in the first half of 2022.
The majority of our decline took place in the first quarter as we were too slow to react to the Fed’s decision to increase interest rates and shrink its balance sheet to cool the over-heated economy.
The next stage of the bear market will most likely involve lower corporate earnings due to a more challenging businessclimate and reducedaccess to capital.

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