Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<div class="content-highlight">In this insight, we provide an updated SoTP (Sum-of-the Parts) valuation analysis of <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a>. We first highlighted a deep valuation gap of this stock in our insight <a href="https://www.smartkarma.com/insights/lg-corp-deep-value-4-key-catalysts" target="_blank" data-smartkarma-citation="insights:45512" rel="noopener">LG Corp: Deep Value + 4 Key Catalysts</a> on 19 November 2020. Since then, LG Corp's shares are up 29%. Although LG Corp's shares have performed really well in the past several weeks, we believe there is further significant upside to current share price.</div>

In this insight, we provide an updated SoTP (Sum-of-the Parts) valuation analysis of LG Corp (003550 KS). We first highlighted a deep valuation gap of this stock in our insight LG Corp: Deep Value + 4 Key Catalysts on 19 November 2020. Since then, LG Corp's shares are up 29%. Although LG Corp's shares have performed really well in the past several weeks, we believe there is further significant upside to current share price.

LG Corp: Updated SoTP Valuation Analysis & Timing of Key Upcoming Catalyst Events

On 23 December, <a href="https://www.smartkarma.com/entities/lg-electronics-inc" target="_blank" data-smartkarma-citation="entities:8814:1" rel="noopener">LG Electronics (066570 KS)</a> announced that it will spin off its electric vehicles components business and form a <a href="https://www.ft.com/content/c3c711a6-d5dd-4343-a9c3-7744fb71091f" target="_blank" rel="noopener">major joint venture</a> with <a href="https://www.smartkarma.com/entities/magna-international-inc" target="_blank" data-smartkarma-citation="entities:25498:1" rel="noopener">Magna International (MG CN)</a> (Canada). The name of this JV newco is LG Magna e-Powertrain. LG Electronics has provided EV components such as motors and battery packs for GM's Bolt and Jaguar's I-Pace electric vehicles.  Magna makes EV gear for Volkswagen and other carmakers. The JV will employ about 1,000 people in North America, Korea, and China. The initial value of the newly formed JV will be $925 million.<div class="content-highlight">There has been a lot of local speculation that this new JV (LG Magna e-Powertrain) could potentially become a leading supplier to Apple's new EVs. This has been a major reason why LG Electronics' share price has been so strong post this announcement of the JV creation.</div>The formation of the JV LG Magna E-Powertrain certainly appears to have a positive impact on the shares of LG Electronics (common), LG Electronics (pref), and LG Corp. Among these these LG Electronics (pref) appears to have the strongest momentum as investors attempt to reduce the price gap between the common and preferred shares.

On 23 December, LG Electronics (066570 KS) announced that it will spin off its electric vehicles components business and form a major joint venture with Magna International (MG CN) (Canada). The name of this JV newco is LG Magna e-Powertrain. LG Electronics has provided EV components such as motors and battery packs for GM's Bolt and Jaguar's I-Pace electric vehicles.  Magna makes EV gear for Volkswagen and other carmakers. The JV will employ about 1,000 people in North America, Korea, and China. The initial value of the newly formed JV will be $925 million.There has been a lot of local speculation that this new JV (LG Magna e-Powertrain) could potentially become a leading supplier to Apple's new EVs. This has been a major reason why LG Electronics' share price has been so strong post this announcement of the JV creation.The formation of the JV LG Magna E-Powertrain certainly appears to have a positive impact on the shares of LG Electronics (common), LG Electronics (pref), and LG Corp. Among these these LG Electronics (pref) appears to have the strongest momentum as investors attempt to reduce the price gap between the common and preferred shares.

LG Electronics' New JV (LG Magna E-Powertrain): A Strategy to Become a Supplier to Apple's EVs?

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/cowell-e-holdings-inc" target="_blank" data-smartkarma-citation="entities:336:1" rel="noopener">Cowell E Holdings (1415 HK)</a> is a major supplier of camera modules for mobile devices to leading mobile device manufacturers such as <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a>. On Thursday after market close, Cowell announced a sale and purchase agreement (SPA) and a possible mandatory conditional cash offer. As the offeror will acquire more than 30% of the voting rights because of the SPA, the Takeovers Code requires the offeror to make a mandatory conditional cash offer for all the issued shares. The offer price of HK$5.87 per share, which is in line to SPA price, is a 2.98% premium to the last trading price of HK$5.70 per share (9 December prior to the trading halt). <div class="content-highlight">The offer is conditional on the offeror and concert parties holding more than 50% of the voting rights. Post the SPA completion, the offeror will hold 44.87% of the outstanding shares and voting rights. In combination with a reasonable price, we think that offer will fulfil the completion condition and become unconditional. </div>

Cowell E Holdings (1415 HK) is a major supplier of camera modules for mobile devices to leading mobile device manufacturers such as Apple Inc (AAPL US). On Thursday after market close, Cowell announced a sale and purchase agreement (SPA) and a possible mandatory conditional cash offer. As the offeror will acquire more than 30% of the voting rights because of the SPA, the Takeovers Code requires the offeror to make a mandatory conditional cash offer for all the issued shares. The offer price of HK$5.87 per share, which is in line to SPA price, is a 2.98% premium to the last trading price of HK$5.70 per share (9 December prior to the trading halt). The offer is conditional on the offeror and concert parties holding more than 50% of the voting rights. Post the SPA completion, the offeror will hold 44.87% of the outstanding shares and voting rights. In combination with a reasonable price, we think that offer will fulfil the completion condition and become unconditional. 

Cowell E Holdings’ Possible Mandatory Conditional Cash Offer

On 26 November, <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a> officially announced the formation of another Holdco (tentatively named 'LG NewCo') and the split of 4 companies (out of 13 affiliates) from LG Corp including <a href="https://www.smartkarma.com/entities/lg-international-corp" target="_blank" data-smartkarma-citation="entities:3281:1" rel="noopener">LG International (001120 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-hausys-ltd" target="_blank" data-smartkarma-citation="entities:11613:1" rel="noopener">LG Hausys Ltd (108670 KS)</a>, <a href="https://www.smartkarma.com/entities/silicon-works-co-ltd" target="_blank" data-smartkarma-citation="entities:20670:1" rel="noopener">Silicon Works (108320 KS)</a>, and LG MMA. In addition, Pantos will become an affiliate of LG International. The LG NewCo will be operated separately from LG Corp and the former company will have its own separate BOD and senior professional managers who will oversee the company. The new BOD will be headed up by Koo Bon Joon, the uncle of the current LG Chairman Koo Kwang Mo. Overall, we believe this creation of the LG NewCo will have a positive impact on <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a>. However, the overall impact is likely to be much bigger for LG NewCo than LG Corp. Therefore, once the two stocks start to trade again on May 27th, 2021, there is a good chance that LG NewCo stock price rises higher than LG Corp.In this insight, we have also provided an updated SoTP valuation of LG Corp and a SoTP valuation of LG NewCo.

On 26 November, LG Corp (003550 KS) officially announced the formation of another Holdco (tentatively named 'LG NewCo') and the split of 4 companies (out of 13 affiliates) from LG Corp including LG International (001120 KS), LG Hausys Ltd (108670 KS), Silicon Works (108320 KS), and LG MMA. In addition, Pantos will become an affiliate of LG International. The LG NewCo will be operated separately from LG Corp and the former company will have its own separate BOD and senior professional managers who will oversee the company. The new BOD will be headed up by Koo Bon Joon, the uncle of the current LG Chairman Koo Kwang Mo. Overall, we believe this creation of the LG NewCo will have a positive impact on LG Corp (003550 KS). However, the overall impact is likely to be much bigger for LG NewCo than LG Corp. Therefore, once the two stocks start to trade again on May 27th, 2021, there is a good chance that LG NewCo stock price rises higher than LG Corp.In this insight, we have also provided an updated SoTP valuation of LG Corp and a SoTP valuation of LG NewCo.

LG Group Announces the Formation of LG NewCo & Split of 4 Companies from LG Corp

Equity Bottom-Up

<div class="content-highlight">
In this insight, we provide an updated SoTP valuation analysis on <a href="https://www.smartkarma.com/entities/lg-corp" target="_blank" data-smartkarma-citation="entities:6653:1" rel="noopener">LG Corp (003550 KS)</a>. We have a positive view of this stock. Our base case valuation analysis suggests an implied price of 120,787 won per share, representing a 60% upside from current levels.
</div>
In addition to its deep discount versus its NAV, there are also 4 key catalysts for the company which are as follows:
<ul>
<li>Potential for higher dividends</li>
<li>IPO of LG Energy Solutions</li>
<li>
Split of LG International and LG Hausys from the LG Group 
</li>
<li> Time to Close to the Gaps With Major Affiliates </li>
</ul>


In this insight, we provide an updated SoTP valuation analysis on LG Corp (003550 KS). We have a positive view of this stock. Our base case valuation analysis suggests an implied price of 120,787 won per share, representing a 60% upside from current levels.

In addition to its deep discount versus its NAV, there are also 4 key catalysts for the company which are as follows:

Potential for higher dividends
IPO of LG Energy Solutions

Split of LG International and LG Hausys from the LG Group 

 Time to Close to the Gaps With Major Affiliates 


South Korea

LG Electronics Inc. manufactures and markets digital display equipment and home appliances. The Company produces and markets flat panel televisions, A/V products, washing machines, air conditioners and refrigerators as well as telecommunications equipment such as smart phones and tablets.

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LG Electronics (066570 KS)

LG Corp: Updated SoTP Valuation Analysis & Timing of Key Upcoming Catalyst Events

In this insight, we provide an updated SoTP (Sum-of-the Parts) valuation analysis of LG Corp. Our revised NAV of LG Corp is 152,080 won,...

Douglas Kim

LG Electronics' New JV (LG Magna E-Powertrain): A Strategy to Become a Supplier to Apple's EVs?

On 23 December, LG Electronics (066570 KS) announced that it will spin off its electric vehicles components business and form a major joint venture...

Douglas Kim

Cowell E Holdings’ Possible Mandatory Conditional Cash Offer

Cowell announced a possible mandatory conditional cash offer at HK$5.87 per share. In combination with a reasonable price, we think that offer will...

Arun George

LG Group Announces the Formation of LG NewCo & Split of 4 Companies from LG Corp

LG Group announced the creation of the LG NewCo, which we believe will have a positive impact on LG Corp. However, the overall positive impact is...

Douglas Kim

LG Corp: Deep Value + 4 Key Catalysts

In this insight, we provide 4 key catalysts of LG Corp as well as an updated SoTP valuation analysis on the company. Our base case value suggests a...

Douglas Kim

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