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

LG Corp: Major Shareholder Stock Swap Situation Checkup

LG Corp/LX Holdings: Official Base Prices & Index Calculation Timeline & Treatment Clarification

LG Corp Split: Major Shareholder Cross Trading Dynamics

LG Corp Post-Spinoff NAV Update & Relisting Day Trade Approach

Clepsydra Capital

Investigate special situations, pairs, and index rebalancing trades in Korea.

Event-Driven

<p>LG Corp's 3-day correction puts the price ratio to its synthetic 21.83% below the 180-day high. It is now pretty much at the 180-day mean. </p><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/210/322/original/LG+Corp+vs+Synthetic+Subsidiary.png?1622503301" class="editor-image img-responsive" data-smartkarma-image-id="210322"></figure></section><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"LG Corp"}' data-sheets-formula="=R[-80]C[0]">LG Corp</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Current sigma on a 20-day moving average"}'>Current sigma on a 20-day moving average</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-2.7385958489570132}' data-sheets-numberformat='{"1":2,"2":"#,##0.00","3":1}' data-sheets-formula='=indirect("$B"&amp;R[8]C[0])'>-2.74σ</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"%Δ to 180-day mean"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'><strong>Price ratio %Δ to 180-day mean</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.026883633025444442}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=indirect("$B"&amp;R[6]C[0])'><strong>+2.69%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"%Δ to 180-day high"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'><strong>Price ratio %Δ to 180-day high</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-0.21831222028206346}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=indirect("$C"&amp;R[5]C[0])'><strong>-21.83%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"%Δ to 180-day low"}' data-sheets-numberformat='{"1":4,"2":"[$₩]#,##0"}'>Price ratio %Δ to 180-day low</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.20080215233447854}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula='=indirect("$D"&amp;R[4]C[0])'>+20.08%</td>
</tr>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Source: KRX"}'>Source: KRX</td></tr>
</tbody>
</table><p>LG Corp is now at a 71.34% discount to its NAV. LX Holdings is also pushed down to a 40.78% discount to the NAV with a 3-day price correction of 56.72% from the base price.</p><table class="table table-striped">
<colgroup>
<col width="100">
<col width="100">
<col width="100">
</colgroup>
<tbody>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV"}' data-sheets-note="Sang Hyun Park: Cases when a company's net cash position and the value of its publically traded interests are worth more than its market cap create the opportunity of a stub trade, in which investors can take a view that the company's core business will rise by shorting the minority stakes whilst going long the underlying. Such an opportunity has arisen in the wake of the Alibaba listing which has seen early investing company Yahoo trade at a discount to the value of its stake in Alibaba.">NAV</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LG Corp"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula="=R[-12]C[0]">LG Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":2,"2":"LX Holdings Corp"}' data-sheets-numberformat='[null,2,"#,##0",1]' data-sheets-formula="=R[-12]C[5]">LX Holdings Corp</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of listed holdings"}'>Value of listed holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":38492.822249340556}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=SUM(R[31]C[2]:R[36]C[2])">₩38,492.8B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1157.0833809438}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=SUM(R[27]C[7]:R[29]C[7])">₩1,157.1B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":" - % of Holdco market cap"}'>- % of Holdco market cap</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2.6578371305170547}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[-1]C[0]/((R[-12]C[0]*R[-15]C[0])/1000000000)">265.78%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1.3852747681580349}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=R[-1]C[0]/((R[-12]C[5]*R[-15]C[5])/1000000000)">138.53%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of unlisted holdings"}'>Value of unlisted holdings</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":2516.349}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=SUM(R[35]C[2]:R[36]C[2])">₩2,516.3B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":115.35}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=SUM(R[28]C[7])">₩115.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value"}'>Stub value</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-26526.4093797853}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=(R[-14]C[0]*R[-17]C[0]/1000000000)-R[-3]C[0]-R[-1]C[0]">-₩26,526.4B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-437.15982544379995}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=(R[-14]C[5]*R[-17]C[5]/1000000000)-R[-3]C[0]-R[-1]C[0]">-₩437.2B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Stub value per share"}'>Stub value per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-184990.08486705087}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*1000000000/R[-18]C[0]">-₩184,990</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":-5730.936957227313}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]*1000000000/R[-18]C[5]">-₩5,731</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of operating assets"}'>Value of operating assets</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":7940}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=SUM(R[51]C[2])">₩7,940.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=SUM(R[39]C[7])">₩0.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV"}'>GAV</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":48949.17124934056}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-6]C[0]+R[-4]C[0]+R[-1]C[0]">₩48,949.2B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1272.4333809437999}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-6]C[0]+R[-4]C[0]+R[-1]C[0]">₩1,272.4B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"GAV per share"}'>GAV per share</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":341362.12006468733}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-11]C[0]*1000000000">₩341,362</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":16680.936957227314}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-11]C[5]*1000000000">₩16,681</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to GAV (excl. treasury shares)"}'>Discount to GAV (excl. treasury shares)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7041265153237837}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-19]C[0])/R[-1]C[0]">70.41%</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.34356205361379794}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-19]C[5])/R[-1]C[0]">34.36%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Holdco net cash/debt (de-consolidated)"}'>Holdco net cash/debt (de-consolidated)</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1770.0119120000002}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[48]C[2]">₩1,770.0B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":172}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[36]C[7]">₩172.0B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Value of pref shares"}'>Value of pref shares</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":194.7411866891386}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=(R[-20]C[0]*R[-17]C[0])/1000000000">₩194.7B</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":33.92134775}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=(R[-20]C[5]*R[-17]C[5])/1000000000">₩33.9B</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV"}'><strong>NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":50524.44197465142}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-5]C[0]+R[-2]C[0]-R[-1]C[0]"><strong>₩50,524.4B</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":1410.5120331937999}' data-sheets-numberformat='[null,2,"₩#,##0.0B",1]' data-sheets-formula="=R[-5]C[0]+R[-2]C[0]-R[-1]C[0]"><strong>₩1,410.5B</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"NAV per share (excl. treasury shares)"}'><strong>NAV per share (excl. treasury shares)</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":352347.7555870701}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-16]C[0]*1000000000"><strong>₩352,348</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":18491.075961607057}' data-sheets-numberformat='[null,2,"[$₩-412]#,##0",1]' data-sheets-formula="=R[-1]C[0]/R[-16]C[5]*1000000000"><strong>₩18,491</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Discount to NAV"}'><strong>Discount to NAV</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7133513740375126}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-24]C[0])/R[-1]C[0]"><strong>71.34%</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4078224532344446}' data-sheets-numberformat='[null,3,"0.00%",1]' data-sheets-formula="=(R[-1]C[0]-R[-24]C[5])/R[-1]C[0]"><strong>40.78%</strong></td>
</tr>
<tr><td colspan="3" rowspan="1" data-sheets-value='{"1":2,"2":"Source: KRX &amp; DART","6":1}'>Source: KRX &amp; DART</td></tr>
</tbody>
</table><p>LG Corp's 71.34% NAV discount is the highest even among the highly-discounted comparable local holding companies.</p><table class="table table-striped">
<colgroup>
<col width="70">
<col width="70">
</colgroup>
<tbody>
<tr><td colspan="2" data-sheets-value='{"1":2,"2":"Discount &amp; weight"}'>NAV discount of the comparable local holding companies at the last closing prices</td></tr>
<tr>
<td data-sheets-value='{"1":2,"2":"LG Corp"}' data-sheets-formula="=R[-22]C[0]"><strong>LG Corp</strong></td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.7133513740375126}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=NAV!R[6]C[0]"><strong>71.34%</strong></td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Samsung C&amp;T Corp"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]' data-sheets-formula="=R[-22]C[0]">Samsung C&amp;T Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.600814867090198}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=NAV!R[5]C[12]">60.08%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"SK Inc"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]' data-sheets-formula="=R[-22]C[0]">SK Inc</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5200541636690171}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=NAV!R[4]C[18]">52.01%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Lotte Corp"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]' data-sheets-formula="=R[-22]C[0]">Lotte Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5479794057666695}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=NAV!R[3]C[24]">54.80%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Hanwha Corp"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]' data-sheets-formula="=R[-22]C[0]">Hanwha Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5802746134439841}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=NAV!R[2]C[30]">58.03%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"CJ Corp"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]' data-sheets-formula="=R[-22]C[0]">CJ Corp</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.4699156030660857}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=NAV!R[1]C[36]">46.99%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Kolmar Korea Holdings Co Ltd"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]' data-sheets-formula="=R[-22]C[0]">Kolmar Korea Holdings Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.5027453492894413}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=NAV!R[0]C[42]">50.27%</td>
</tr>
<tr>
<td data-sheets-value='{"1":2,"2":"Harim Holdings Co Ltd"}' data-sheets-numberformat='[null,4,"[$₩]#,##0"]' data-sheets-formula="=R[-22]C[0]">Harim Holdings Co Ltd</td>
<td style="text-align: right;" data-sheets-value='{"1":3,"3":0.6911875863701072}' data-sheets-numberformat='{"1":3,"2":"0.00%","3":1}' data-sheets-formula="=NAV!R[-1]C[54]">69.12%</td>
</tr>
<tr><td colspan="2">Source: KRX &amp; DART</td></tr>
</tbody>
</table>

LG Corp's 3-day correction puts the price ratio to its synthetic 21.83% below the 180-day high. It is now pretty much at the 180-day mean. 





LG Corp

Current sigma on a 20-day moving average
-2.74σ


Price ratio %Δ to 180-day mean
+2.69%


Price ratio %Δ to 180-day high
-21.83%


Price ratio %Δ to 180-day low
+20.08%

Source: KRX

LG Corp is now at a 71.34% discount to its NAV. LX Holdings is also pushed down to a 40.78% discount to the NAV with a 3-day price correction of 56.72% from the base price.







NAV
LG Corp
LX Holdings Corp


Value of listed holdings
₩38,492.8B
₩1,157.1B


- % of Holdco market cap
265.78%
138.53%


Value of unlisted holdings
₩2,516.3B
₩115.4B


Stub value
-₩26,526.4B
-₩437.2B


Stub value per share
-₩184,990
-₩5,731


Value of operating assets
₩7,940.0B
₩0.0B


GAV
₩48,949.2B
₩1,272.4B


GAV per share
₩341,362
₩16,681


Discount to GAV (excl. treasury shares)
70.41%
34.36%


Holdco net cash/debt (de-consolidated)
₩1,770.0B
₩172.0B


Value of pref shares
₩194.7B
₩33.9B


NAV
₩50,524.4B
₩1,410.5B


NAV per share (excl. treasury shares)
₩352,348
₩18,491


Discount to NAV
71.34%
40.78%

Source: KRX &amp; DART

LG Corp's 71.34% NAV discount is the highest even among the highly-discounted comparable local holding companies.





NAV discount of the comparable local holding companies at the last closing prices

LG Corp
71.34%


Samsung C&amp;T Corp
60.08%


SK Inc
52.01%


Lotte Corp
54.80%


Hanwha Corp
58.03%


CJ Corp
46.99%


Kolmar Korea Holdings Co Ltd
50.27%


Harim Holdings Co Ltd
69.12%

Source: KRX &amp; DART



LG Corp: Block Deal Concern Causes an Even Harsher Correction