South Korean electric cable manufacturer LS Cable & System is expected to benefit from the government’s Green New Deal initiatives next year, with the company’s submarine cable backlogs of 1 trillion won ($900 million) alone likely to drive sharply higher growth.
Launched in mid-July, the 114 trillion won ($94.5 billion) Green New Deal aims to support the country’s recovery from the Covid-19 pandemic by attracting investment in advanced digital technologies, housing, industry, electric vehicles and renewable energy projects.
LS Group wouldn’t have been so comfortable with the Green New Deal initiatives a few months ago, because the group’s affiliate LS Mtron had sold its copper foil and flexible copper clad laminate business to KKR back in 2018. KKR bought the business for 300 billion won and sold it to SKC for 1.2 trillion won in the following year.
The cable firm had to sell its core business to shore up its financial structure. However, even KKR’s sale price of 1.2 trillion seems cheap after the stock price of SKC rose 80% this year when copper foil emerged as the core material of secondary batteries. The market capitalization of SKC grew to 3.5 trillion won, much larger than LS Corp’s 2.4 trillion won.
LS Group has especially been struggling with initial public offerings (IPOs), with the listing of LS Cable & System’s electric vehicle components subsidiary LS EV Korea cancelled in March due to the Covid-19 pandemic. The company was very unlucky, because the IPO market has been booming since investors started to get used to the pandemic situation.
The listing of LS Cable & System was halted due to risks relating to its subsidiary almost a decade ago. The group changed its strategy and listed shares of LS Cable & System Asia in 2016, but failed to attract strong interest. In the following year, LS Automotive applied for a preliminary review for the IPO, but suddenly dropped plans to sell its stake.
Despite these setbacks, LS Cable & System is likely to do well from the Green New Deal, not only through its submarine cable business but also in electric vehicle components markets. In addition, the company’s renewable energy business is ready to swing to profit.
Industry watchers say LS EV Korea must try listing its shares again and LS Alsco should start its IPO process in the next few years. The deals could be successful if the companies are able to give a rosy outlook for the electric vehicles market. (Reporting by Pil-woo Choi)