[Click eStock] "LG, Uncertainty Resolved Following Affiliate Separation"

[Asia Economy Reporter Song Hwajeong] NH Investment & Securities maintained a 'Buy' rating and a target price of 164,000 KRW for LG on the 15th, expecting that the stock undervaluation will be resolved with the completion of the separation from LX.

Before the market opened the previous day, Koo Bon-jun, Chairman of LX Holdings, disposed of 6.57 million shares, equivalent to 4.2% of LG's 7.7% stake, through an after-hours block deal, and donated 2.36 million shares, or 1.5%, to three foundations (LG Yeonam Cultural Foundation, LG Saengrok Foundation, LG Welfare Foundation). Chairman Koo's stake in LG decreased to 2% (2.9% including his children's shares), meeting the final condition for separation of affiliates, which requires the controlling shareholder's stake to be below 3%. Regarding LX Holdings, Chairman Koo acquired 32.3% (24.65 million shares, approximately 250 billion KRW) of shares from Koo Kwang-mo, LG Chairman, and eight others, increasing his stake to 40.0% (major shareholder and related parties 45.9%). Accordingly, after review by the Fair Trade Commission, the separation of LG and LX affiliates is expected to be completed in the first half of next year.

Kim Dong-yang, a researcher at NH Investment & Securities, analyzed, "Uncertainties due to delays in stock exchange following the LG-LX spin-off in April had contributed to the stock price weakness, but this stock exchange has resolved the uncertainty regarding the separation of affiliates," adding, "With the completion of the separation, LG is expected to actively strengthen its new growth portfolio such as ESG (environment, social, governance), bio and digital healthcare, and deep tech by establishing a corporate venture capital (CVC) and utilizing net cash of 1.7 trillion KRW."

Dividend income is also expected to increase. Researcher Kim said, "Dividend income is expected to expand due to partial disposal of shares in the business subsidiary S&I Corporation and the listing of the grandchild company LG Energy Solution," and added, "LG's current stock price is at a 69% discount compared to net asset value (NAV), with a dividend yield of 3.4%, indicating sufficient valuation merits."