In today’s briefing:
- SK On Valuation at 22 Trillion Won – Impact on SK Innovation
- Close Out the Pair Trade Between LG Chem & LG Energy Solution
- Hana – Granular Data On China
SK On Valuation at 22 Trillion Won – Impact on SK Innovation
- SK On announced that it recently received 1 trillion won in investment, valuing the company at 22 trillion won, 29% higher than SK Innovation’s market cap of 17 trillion won.
- The recent investment of nearly 1 trillion won in SK On was in the form of convertible preferred stock (CPS), which guarantees a minimum return of 7.5%.
- Our SoTP valuation of SK Innovation suggests a target price of 254,396 won per share, which represents a 39% higher levels than current price.
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 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.
Hana – Granular Data On China
- Hana Financial Group reported a loss in its China banking business in 9MQ22
- Hana Bank (China) recorded credit costs at KRW119bn or 20% of group total
- Off balance sheet commitments in China appear to be moving on balance sheet
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