LX Holdings struggles from weak stock price, earnings, 2 years after spinoff

LX Holdings Corp. headquarters [Courtesy of LX Holdings]

LX Holdings Corp., which spun off from South Korea’s LG Group two years ago, has seen its stock price plunge 68 percent after the spinoff as offshore investors dumped the stock due to growing uncertainty over subsidiary earnings and governance issues.

According to the Korea Exchange on Tuesday, shares of LX Holdings plummeted 6.97 percent this year, which is in contrast to how the benchmark Kospi jumped 14.58 percent.

The stock has nosedived 68.89 percent since its initial public offering (IPO) after being separated from LG Group on May 27, 2021.

The lackluster performance comes as foreign investors shun the stock. Foreign ownership in the stock, which stood at 31.27 percent at time of the IPO, is now 9.64 percent, down by more than 20 percentage points.

The value of LX Holdings is on a steady decline as the stock price continues to fall.

The company’s quarterly price-to-earnings ratio (PBR), which neared 0.7 times during the spinoff, fell to 0.4 times in the first quarter this year.

Increased uncertainty in the earnings of its major subsidiaries has been cited as a reason behind the stock’s sluggish performance.

According to Heungkuk Securities Co., the combined sales of LX Holdings’ key subsidiaries LX International Corp., LX Hausys Ltd., LX Semicon Co., and LX MMA Corp. are projected to drop 14.9 percent and operating profit 29.9 percent year on year. Net income is also expected to decline by 22.7 percent.

Some analysts blame the change in governance for the stock’s poor performance as the separation from LG Group means less transactions within the group, which raises concerns about uncertain earnings.

Ownership issue also acts as an impediment.

Currently, LX Holdings’ largest shareholder is Chairman Koo Bon-joon. Koo has been transferring shares to his eldest son, Vice Chairman Koo Hyung-mo, and his eldest daughter, Koo Yeon-je, since 2021.