Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Event-Driven

<p><span data-hook="tip" data-type="arken" data-lang="en">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. </span>The new BOD will be headed up by Koo Bon Joon, the uncle of the current LG Chairman Koo Kwang Mo. </p><p>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.</p><p>In this insight, we have also provided an updated SoTP valuation of LG Corp and a SoTP valuation of LG NewCo.</p>

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">
<p><strong>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.</strong></p>
</div>
<p>In addition to its deep discount versus its NAV, there are also 4 key catalysts for the company which are as follows:</p>
<ul>
<li><strong>Potential for higher dividends</strong></li>
<li><strong>IPO of LG Energy Solutions</strong></li>
<li>
<strong>Split of LG International and LG Hausys </strong><strong>from the LG Group </strong>
</li>
<li><strong> Time to Close to the Gaps With Major Affiliates </strong></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 


<p>It was announced this morning that <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> and <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> will split from the LG Group. Following this announcement, LG International and LG Hausys shares are up 2.9% and 5.4%, respectively. Koo Bon-Joon, the second eldest member of the Koo brother of the LG Group, is leading this split. Koo Bon-Joon has a 7.7% stake in LG Corp (003550 KS), which is currently worth 992 billion won. </p><p>Both LG International and LG Hausys' share price are rising because many investors believe that once they are split from the LG Group, they believe that the new owner Koo Bon-Joon could revitalize these companies and that this M&amp;A event is a key signal that Koo Bon-Joon is trying to complete this deal when these two companies are highly undervalued. </p>

It was announced this morning that LG International (001120 KS) and LG Hausys Ltd (108670 KS) will split from the LG Group. Following this announcement, LG International and LG Hausys shares are up 2.9% and 5.4%, respectively. Koo Bon-Joon, the second eldest member of the Koo brother of the LG Group, is leading this split. Koo Bon-Joon has a 7.7% stake in LG Corp (003550 KS), which is currently worth 992 billion won. Both LG International and LG Hausys' share price are rising because many investors believe that once they are split from the LG Group, they believe that the new owner Koo Bon-Joon could revitalize these companies and that this M&amp;A event is a key signal that Koo Bon-Joon is trying to complete this deal when these two companies are highly undervalued. 

LG International & LG Hausys To Split from the LG Group

<div class="content-highlight">
<p><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> is the 6th company we introduce in our<strong> "Korea Small Cap Gem"</strong> series. LG International is one of the seven major trading companies in Korea that could receive a greater positive boost from the global institutional investors who seek to find similar companies to the Japanese trading companies invested by Warren Buffett.</p>
<p>LG International was one of the seven Korean trading companies we mentioned in our report <a href="https://www.smartkarma.com/insights/buffett-s-investments-in-japanese-trading-companies-positive-boost-to-korean-trading-companies" target="_blank" data-smartkarma-citation="insights:43239" rel="noopener">Buffett's Investments in Japanese Trading Companies - Positive Boost to Korean Trading Companies?</a> </p>
</div>


LG International (001120 KS) is the 6th company we introduce in our "Korea Small Cap Gem" series. LG International is one of the seven major trading companies in Korea that could receive a greater positive boost from the global institutional investors who seek to find similar companies to the Japanese trading companies invested by Warren Buffett.
LG International was one of the seven Korean trading companies we mentioned in our report Buffett's Investments in Japanese Trading Companies - Positive Boost to Korean Trading Companies? 


Cross Asset Strategy

<div class="content-highlight"><p><strong>It has been reported in the past few days that <a href="http://www.koreaninvestors.com/?p=12175" target="_blank" rel="noopener">NPS</a> is likely to put a greater emphasis on ESG (environmental, social, &amp; governance) based investing for Korean stocks and bonds starting 2021. </strong>NPS has currently given a mandate to a company to help NPS to apply ESG based investment system. The ESG evaluations are expected to aid NPS to actively exercise shareholder rights and also to carry out negative screening of stocks.</p></div><h3>Implications of NPS Incorporating More ESG Criteria on Domestic Investments (Bonds &amp; Stocks)</h3><ul>
<li>Negative Impact on VICE industries </li>
<li>Positive Impact on Renewable Energy Industries</li>
<li>Negative Impact on Coal &amp; Oil Industries</li>
<li>Greater Representation of Women in Senior Management Team/BOD</li>
</ul>

It has been reported in the past few days that NPS is likely to put a greater emphasis on ESG (environmental, social, &amp; governance) based investing for Korean stocks and bonds starting 2021. NPS has currently given a mandate to a company to help NPS to apply ESG based investment system. The ESG evaluations are expected to aid NPS to actively exercise shareholder rights and also to carry out negative screening of stocks.Implications of NPS Incorporating More ESG Criteria on Domestic Investments (Bonds &amp; Stocks)
Negative Impact on VICE industries 
Positive Impact on Renewable Energy Industries
Negative Impact on Coal &amp; Oil Industries
Greater Representation of Women in Senior Management Team/BOD


NPS - Greater Emphasis of ESG Based Investing for Korean Stocks & Bonds Starting 2021

South Korea

LX International is a commodity trading and mining company.  The Company develops and trades coal, oil, gas, non-ferrous metals, palm oil, and renewable energy. LG International also trades IT related component/equipment, petrochemical and steel product.

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LX International (001120 KS)

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

LG International & LG Hausys To Split from the LG Group

It was announced this morning that LG International and LG Hausys Ltd will split from the LG Group. Koo Bon-Joon, the second eldest member of the...

Douglas Kim

Korea Small Cap Gem #6: LG International

LG International (001120 KS) is the 6th company we introduce in our "Korea Small Cap Gem" series. LG International is one of the seven major...

Douglas Kim

NPS - Greater Emphasis of ESG Based Investing for Korean Stocks & Bonds Starting 2021

It has been reported in the past few days that NPS is likely to put a greater emphasis on ESG (environmental, social, & governance) based...

Douglas Kim

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