In today’s briefing:
- POSCO Future M: A Rights Offering Capital Raise of 1.1 Trillion Won
- Unpacking Posco Future M’s Rights Offering Disclosed After Market Close Today
- A Pair Trade Between LG Electronics and LG Display
- KOSPI 200 Tactical Outlook: Waiting for the June Elections
POSCO Future M: A Rights Offering Capital Raise of 1.1 Trillion Won
- Posco Future M (003670 KS) announced today that it plans to complete a rights offering capital raise of 1.1 trillion won.
- The capital raise will involve 11.483 million new shares, representing 14.8% of current outstanding shares. The expected rights offering price is 95,800 won, which is 15.8% lower than current price.
- We have a Negative view on POSCO Future M and this capital raise, which is likely to have a negative impact on its shares due to the dilution risk.
Unpacking Posco Future M’s Rights Offering Disclosed After Market Close Today
- The pricing’s standard—20% discount, 14.82% dilution. First-round price on June 12, final on July 16. The 20% discount could offer a bigger arb window than Samsung SDI or Hanwha Aero.
- Posco Holdings confirmed full participation, taking half of the offering (500B+ KRW). With the ESOP in play, only 40% (400B KRW) remains, limiting potential trading upside despite the 20% discount.
- Future M’s down 8% in after-hours, Holdings 3.5%. The sharp drop follows no deal leaks and sector concerns, suggesting more downside tomorrow, with the price gap key for day-night trading.
A Pair Trade Between LG Electronics and LG Display
- In this insight, we discuss a pair trade between LG Electronics (066570 KS) (long) and LG Display (034220 KS) (short).
- LG Display is likely to face greater margin pressures than LG Electronics this year, which could lead a bigger consensus estimates downward revisions for LG Display than LG Electronics.
- Both LG Electronics and LG Display are trading at 0.6x P/B multiples. Given LG Electronics’ much higher ROE vs LG Display, LG Electronics should be trading at higher valuation multiples.
KOSPI 200 Tactical Outlook: Waiting for the June Elections
- In just three weeks, on June 3rd, South Korea will hold an early presidential election.
- The KOSPI 200 INDEX on Tuesday closed at 347.17, entering deeply overbought territory based on our time and price quantitative models.
- Whether the index rallies into the election and then declines, or starts selling off ahead of the vote, our tactical stance is unchanged: we recommend short exposure or appropriate hedging.
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