In today’s briefing:
- Samsung Electronics Placement – Somewhat Well Flagged but Could Have Timed It Better
- A Comprehensive Update on Implementation of Block Deals Pre-Disclosure in Korea
- Korean Air: Earnings Remain Elevated but Premium May Continue to Unwind as Cargo Yields Re-Set
- LG Energy Solution: A Big Earnings Miss in 4Q 2023
Samsung Electronics Placement – Somewhat Well Flagged but Could Have Timed It Better
- KEB Hana Bank, on behalf of the Lee family, is looking to raise up to US$1.6bn via selling 0.5% of Samsung Electronics (005930 KS)
- The deal appears to be somewhat well flagged, however, the timing could have been much better.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
A Comprehensive Update on Implementation of Block Deals Pre-Disclosure in Korea
- The effective date, required by law to start six months post-promulgation, suggests implementation around July this year.
- Enforcement decrees and regulations, under the Financial Services Commission’s purview, must be confirmed before the effective date (within six months post-promulgation). The announcement is likely in early to mid-March.
- Expecting the amendment, there may be a pre-July surge in block deals as major shareholders expedite plans, creating assertive market activity in the first half with potential trading opportunities.
Korean Air: Earnings Remain Elevated but Premium May Continue to Unwind as Cargo Yields Re-Set
- We forecast EBITDAR of KRW3.35trn for Korean Air in 2023 (KRW3.8trn previously) with EBITDAR/ATK up 50% on 2019/32% on 2018. We remain at KRW2.9trn in 2024 (EBITDAR/ATK +28% vs 2019).
- Unwinding cargo yields may fully eliminate earnings gains but cost management safeguards future prospects despite Asiana merger uncertainty.
- Cost inflation management inflected negatively in 3Q as labour costs rose – control crucial as market conditions normalize and low cost competitors expand.
LG Energy Solution: A Big Earnings Miss in 4Q 2023
- LG Energy Solution reported disappointing preliminary earnings in 4Q 2023. The company reported operating profit of 338.2 billion won (43.5% lower than consensus).
- Post a major earnings miss for LGES in 4Q 2023, the consensus is likely to reduce earnings estimates of the company in 2024 and 2025.
- Major EV players such as Tesla were reducing prices in the past year causing higher pressures on EV battery makers such as LGES to reduce their prices as well.
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