Skip to content
  • KOSPI 3153.32 +31.21 +1.00%
  • KOSDAQ 966.72 +14.95 +1.57%
  • KOSPI200 420.17 +4.10 +0.99%
  • USD/KRW 1130.6 7.10 0.63%
  • JPY100/KRW 1,032.75 8.27 0.80%
  • EUR/KRW 1,365.6 8.92 0.65%
  • CNH/KRW 175.21 0.59 0.34%
View Market Snapshot

Corporate split-off

LG Corp shares surge ahead of relisting after LX Holdings split-off

Apr 15, 2021 (Gmt+09:00)

LG Corp shares surge ahead of relisting after LX Holdings split-off

Shares of LG Corp. are significantly outperforming the broader market on expectations the company will be fairly valued when it’s relisted on the domestic bourse next month following its split-off into two entities.

In early Thursday trade, LG Corp. rose 10.34% -- its biggest daily percentage gain in more than three months -- to 112,500 won. The stock has risen for four straight days following a brief dip after hitting an all-time high of 119,000 won in early January.

Behind the bullish run are foreign investors, who have been steadily purchasing the stock since Apr. 7.

Analysts say LG Corp.’s shares have further upside potential as the company is set to transition into an investment holding company.

Last month, shareholders of LG Corp., the holding company of South Korea’s fourth-largest conglomerate LG Group, approved its plan to hive off four affiliates and place them under another holding firm, named LX Holdings Corp.

LX Holdings, set to launch on May. 1, will have LG International Corp., LG Hausys Ltd., LG MMA Corp. and Silicon Works Co. under its umbrella, while the existing LG Group will continue to have the electronics, telecommunications and chemicals units as its flagship subsidiaries.

SHARE SPLIT RATIO

LG Group said the split-off is designed to increase shareholder value by allowing LG Corp. to focus on other areas of strength.

Since the group is splitting up LG Corp. into two entities with the same shareholder structure, the current shareholders of LG Corp. will be given both new LG Corp. shares and LG Holdings shares at a ratio of 0.912 to 0.088.

LX Holdings logo
LX Holdings logo

As LX Holdings plans a five-to-one share split, however, the existing LG Corp. shareholders will receive a 0.44 share of LX Holdings per old LG Corp.’s stock.

Simply put, an investor who currently holds 100 shares of LG Corp. will receive 91 new LG Corp. shares and 44 LX Holdings shares when they are relisted on the Korea Exchange on May 27. Trading in the current LG Corp. shares will be suspended from Apr. 29.

TRANSITION TO INVESTMENT HOLDING FIRM

Analysts expect LG Corp., which has been undervalued, to have a higher corporate value as a result of the split-off.

LX Holdings head Koo Bon-joon
LX Holdings head Koo Bon-joon
According to NH Investment & Securities Co., the holding company’s share price is currently at a 67% discount to its net asset value (NAV), meaning the stock is trading at one-third its intrinsic value.

“Once the two stocks are relisted on the market, they will likely provide a good opportunity for investors to make money,” said NH Investment analyst Kim Dong-yang.

After the split-off, the remaining LG Group will focus its resources on the battery, auto parts and OLED businesses, with LG Corp. turning into an investment holding company. LG Corp. holds 1.5 trillion won ($1.34 billion) in cash and cashable assets as of the end of 2020.

According to equities market tracker FnGuide, LG Corp.’s operating profit is forecast to rise 46% to 2.48 trillion won this year from the previous year.

“We expect LG Corp. to marshal its abundant liquidity to strengthen shareholder value and beef up its new growth portfolios, including ESG, green tech, bio, digital healthcare and deep tech ventures,” said analyst Kim.

Write to Jae-Yeon Ko at yeon@hankyung.com

In-Soo Nam edited this article.

Comment 0

0/300