Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

I investigate special situations, pairs, and index rebalancing trades in Korea.

Korea / Special Sits, Pairs, Index Rebalancing

NPS Says No to LG Chem Split: October 30 Voting Race Update

Tesla Rally Pushed LG Chem 1P Diversion to an Extreme: Trade σ Reversion & 1P Div

LG Chem Divestiture: Shareholder Voting Race & Swing-Back Trade Opportunity

LG Chem Pref Has Harshly Diverged as the Discount Is at a New 2-Yr High

Event-Driven

LG Chem's latest shareholder return plan is as follows.
At least 30% payout on consolidated earnings (including the battery unit)
A minimum yearly dividend of ₩10,000 per share for 2020~2022 (starting this year)
(Source: DART)The announcement was made on October 14 after the market closed. As a result, we began to see a widening in the 1P/ordinary price ratio.The 20MA sigma peaked at +2.5 (favoring 1P) on October 19. It now settles back at +0.34σ as the price ratio almost got back to the pre-announcement level.









Date
Price ratio
% of σ
1P
Ordinary


10/23/20
0.49769
34.11%
₩323,500
₩650,000


10/22/20
0.50391
75.70%
₩322,000
₩639,000


10/21/20
0.52512
202.03%
₩324,000
₩617,000


10/20/20
0.52174
220.57%
₩324,000
₩621,000


10/19/20
0.52033
245.22%
₩320,000
₩615,000


10/16/20
0.50547
167.36%
₩323,500
₩640,000


10/15/20
0.50549
179.89%
₩322,000
₩637,000


10/14/20
0.49045
54.32%
₩308,000
₩628,000

Source: KRX

1P's immediate surge relative to the ordinary share should have been no surprise as the year-end dividend yield difference was the highest since 2015.











Yield
2015
2016
2017
2018
2019
2020E


1P - DPS
₩4,550
₩5,050
₩6,050
₩6,050
₩2,050
₩10,050


1P - price
₩247,000
₩179,500
₩249,000
₩195,500
₩173,000
₩323,500


1P - dividend yield
1.84%
2.81%
2.43%
3.09%
1.18%
3.11%


Common - DPS
₩4,500
₩5,000
₩6,000
₩6,000
₩2,000
₩10,000


Common - price
₩328,500
₩261,000
₩405,000
₩347,000
₩317,500
₩650,000


Common - dividend yield
1.37%
1.92%
1.48%
1.73%
0.63%
1.54%


Difference
0.47%p
0.89%p
0.94%p
1.36%p
0.55%p
1.56%p


Difference/1P div yield
25.64%
31.91%
39.03%
44.13%
46.84%
50.48%

Source: SEIBro &amp; FnGuide

Any chance of seeing a dividend of more than the minimum guaranteed ₩10,000 this year?The local street consensus earnings (compiled by FnGuide) is ₩1.43T, which delivers a 53.7% payout ratio, well above the 30% threshold. So, this year? We should be complacent with ₩10,000.











Payout (₩B)
2015
2016
2017
2018
2019
2020E


NP to controlling interests
1,153.0
1,281.1
1,945.3
1,472.6
313.4
1,426.3


Dividends
331.3
368.1
460.1
460.1
153.6
766.5


- 1P
34.7
38.5
46.4
46.4
15.7
77.1


- Common
296.6
329.6
413.6
413.6
137.9
689.4


Payout
28.73%
28.73%
23.65%
31.24%
49.01%
53.74%

Source: SEIBro &amp; FnGuide



LG Chem Dividend Situation: 1P/C Trade, Div Play, & Hybrid of Combining Two