Trading Suspension Date Set for Apr 29

The author is an analyst of NH Investment & Securities. He can be reached at dongyang.kim@nhqv.com. -- Ed. 

 

For the upcoming LG-LX spin-off event, the name change and re-listing after spin-off has been set for May 27. The separating off of affiliates is to be completed within this year via share swaps between major shareholders. Already underway is a restructuring process aimed at strengthening the LG Group’s core domains. Moving ahead, we expect LG Corp to marshal its abundant liquidity to strengthen shareholders’ value and its new business portfolio. Its shares are currently trading at a 67% discount to NAV.

Trading suspension date set for Apr 29; name change and re-listing after spin-off to be conducted on May 27

LG Corp is to spin off its affiliates with a ratio of 91 (remaining entity: LG Corp): 9 (new entity: LX Holding). The trading suspension date is set for Apr 29, and the name change and re-listing after spin-off are to be conducted on May 27. With the remaining holding company to retain the core businesses (ie, electronics, chemicals, and telecom), previous spinoff uncertainties are to dissipate. Once the spinoff is completed in 2H21, LG Corp’s business growth should begin in earnest via the nurture of new growth-driving ventures.

Already underway is a restructuring process aimed at strengthening the LG Group’s core domains—recent moves have included the split-off of LG Chem’s battery arm (LG Energy Solution), the establishment of a LG Electronics (LGE)-Magna EV powertrain JV, and the withdrawal from the smartphone arena. Following an OP turnaround last year (2020: W1.7tn, +71% y-y) in response to low-base effects and improved earnings at affiliates, OP appears set to climb 59% y-y this year (2021E: W2.7tn) on anticipated robust earnings for major affiliates. Moving ahead, we expect LG Corp to marshal its abundant liquidity (net cash of W1.6tn) to strengthen shareholders’ value and to beef up its new growth portfolio, including its ESG (Green Tech), bio/digital healthcare, and deep tech ventures.

1Q21 preview: Earnings momentum to remain strong

LG Corp is forecasted to post consolidated 1Q21 sales of W1.73tn (+9% y-y) and OP of W703.5bn (+16% y-y), with both figures roughly satisfying consensus.

Strong earnings momentum is underway for major listed subsidiaries. LGE’s provisional earnings release figures significantly exceeded consensus on solid earnings at its home appliance and TV domains, and LG Chem is expected to book record-high earnings for 1Q21 thanks to favorable petrochemical product spreads. We believe that earnings are also continuing to improve at non-listed subsidiaries. Margins at LG CNS are likely continuing to widen in keeping with both expanded IT investment at LG Group subsidiaries and the internal and external growth of the smart logistics solutions domain (OP W28.1bn, +15% y-y). Meanwhile, better earnings at affiliates likely pushed up OP at S&I Corporation (1Q21E: W23.3bn, +2% y-y).

 

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