Daily Event-Driven: LG Chem Share Class: Another Pref to Watch as Div Yield Gap at 4Y High and more

In this briefing:

1. LG Chem Share Class: Another Pref to Watch as Div Yield Gap at 4Y High
2. Daelim Industrial Share Class: One of Prefs to Arb Trade on Div Payout Record Date

1. LG Chem Share Class: Another Pref to Watch as Div Yield Gap at 4Y High

• LG Chem Ltd (051910 KS) 1P is now at a 44.20% discount to Common. Div would be the same as last year of ₩6,000 despite lower earnings. Payout would be 28%. Div yield for Common will be 1.68%, and 3.03% for 1P. Div yield difference stands at 1.35%p. This is a record high at least since 2014.
• 1P’s discount to Common is hovering at the highest level in 2 years. On a 20D MA, it is close to +1 σ. It may not be tempting enough for those seeking high yields. Otherwise, this’d be worth giving it a shot. Liquidity shouldn’t be an issue. Short recovering risk on Common also appears to be limited.

2. Daelim Industrial Share Class: One of Prefs to Arb Trade on Div Payout Record Date

• Daelim Industrial (000210 KS) is one of the main targets of local activist movement. This makes a setting for higher dividends. Common div yield to 1.58% and Pref to 4.18%. Difference is 2.59%p. This is the widest gap in many years.
• Pref is currently at a 60.89% discount to Common. Among those > ₩100bil MC prefs, it is the second highest discounted pref, only behind CJ Cheiljedang 1P (097955 KS). Local street expects at least ₩1,600 div per share. This should be a conservative estimate. On a 20D MA, Pref is above +1 σ.
• Dec 26 is record date of dividend payout. I expect a price catchup movement tomorrow in favor of Pref. I’d go long Pref and short Common as early in the morning as possible.