Expectations for Spin-off... LG Sangsa Recovers to 20,000 Won Range

[Asia Economy Reporter Koh Hyung-kwang] LG Sangsa's stock price has recovered to the 20,000 KRW range for the first time in over two years. Foreign investors have been buying large amounts of LG Sangsa shares amid expectations of a spin-off from LG Group, boosting the stock price.

According to the Korea Exchange on the 26th, LG Sangsa closed at 20,400 KRW on the KOSPI market the previous day, up 4.8% from the previous trading day. This marks the first time in about two years and one month since October 10, 2018 (20,700 KRW) that LG Sangsa's stock price has recovered to the 20,000 KRW range with a 52-week high.

The stock price, which had hovered around 15,000 KRW for the past five months, broke out of the box range earlier this month and began to rise. The stock price, which was 15,450 KRW at the end of last month, rose to the 18,000 KRW range in mid-month and even surpassed 20,000 KRW the day before. The increase rate this month alone reached 32.1%. Compared to the year’s low of 6,590 KRW on March 20, the stock price has more than tripled.

The driving force behind the rising stock price is foreign investors. Foreigners have purchased LG Sangsa shares worth 11.5 billion KRW over the past month. Since May, the net purchase amount has reached 47.4 billion KRW. The foreign ownership ratio, which was in the 14% range at the beginning of this year, has significantly increased to 22.2% as of the previous day. This is the highest foreign ownership ratio since LG Sangsa was listed in 1985. The market capitalization, which had shrunk to around 260 billion KRW in March, also expanded to 790 billion KRW based on the closing price the previous day.

The background for foreign investors buying large amounts of LG Sangsa shares appears to be the expectation of a spin-off. Industry speculation has been ongoing that Koo Bon-joon, LG Group advisor, will separate several affiliates including LG Sangsa to form a new group, and this became more concrete earlier this month, giving the stock price momentum. Advisor Koo is the third son of the late Koo Ja-kyung, Honorary Chairman of LG, and the younger brother of the late Koo Bon-moo, former LG Chairman.

Considering Advisor Koo’s style, which is regarded as one of the few challenging personalities within the group, it is interpreted that expectations are reflected that the companies spun off will grow significantly. A financial investment industry official said, "There is an expectation that Advisor Koo, who has an aggressive management philosophy, can focus investments on affiliates that were previously lower priority within the group," adding, "In particular, the listing of Pantos, which handles LG Group’s logistics, could become more visible."

There is also a view that the spin-off could naturally resolve the issue of preferential treatment in subcontracting within subsidiaries. Kim Mi-song, a researcher at Cape Investment & Securities, said, "It seems that the expectation that issues related to preferential subcontracting, which made LG Sangsa and Pantos targets of the Fair Trade Commission, will be resolved if they are spun off is reflected in the stock price." This is because internal transaction ratios among LG Electronics, LG Chem, and Pantos have been high.

LG Group will finalize a plan at a board meeting held on the day to spin off LG Sangsa, Pantos, LG Hausys, and others under Advisor Koo from LG Group. Currently, Advisor Koo holds 7.72% of shares in LG Corporation. The value of these shares is about 1 trillion KRW. Using this, Advisor Koo is expected to become independent by securing management rights of LG Sangsa and LG Hausys. The most likely method is for Advisor Koo to exchange his LG Corporation shares for LG Sangsa and LG Hausys shares held by LG Corporation. LG Sangsa has the logistics company Pantos (51% stake) as a subsidiary.

This content was produced with the assistance of AI translation services.