Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Thematic (Sector/Industry)

In this report, we highlight 39 companies that have announced share buybacks in the past three months (Dec 2015 - Feb 2016) in Korea. We provide our top 9 insights and analysis regarding some of the major factors that are influencing the share buybacks in Korea. 1. Samsung Group is spearheading the entire share buybacks movement in Korea. Of the 39 companies we have identified that are conducting share buybacks in Korea, four of them are related to the Samsung Group, including <a href="https://www.smartkarma.com/entities/191" target="_blank" data-smartkarma-citation="entities:191">Samsung Electronics Co Ltd</a> , <a href="https://www.smartkarma.com/entities/511" target="_blank" data-smartkarma-citation="entities:511">Samsung Fire &amp; Marine Ins</a> , <a href="https://www.smartkarma.com/entities/512" target="_blank" data-smartkarma-citation="entities:512">Samsung Securities Co Ltd</a> , and <a href="https://www.smartkarma.com/entities/107" target="_blank" data-smartkarma-citation="entities:107">Hotel Shilla Co Ltd</a> . The total amount of share buybacks that were announced by these four Samsung affiliated companies in the past three months were 3.4 trillion won, representing 84% of the total share buybacks amount of the 39 companies in our list. We believe that the Samsung Group is accelerating its efforts to improve corporate governance (through measures such as share buybacks), faster than some of the other chaebols in Korea. 2. More companies that are buying back shares in Korea are also CANCELLING THEM. of the 39 companies in our list, eight of them (including <a href="https://www.smartkarma.com/entities/191" target="_blank" data-smartkarma-citation="entities:191">Samsung Electronics Co Ltd</a>,) are cancelling their shares. Historically, most Korean companies refused to cancel their shares after completing share buyback. 3. In general, the companies that have been cancelling their shares that they are buying back (eight companies we mentioned in #2) have been outperforming the market.  4. A less well known, medium sized Korean group competing in the specialty chemical sector called Miwon (including <a href="https://www.smartkarma.com/entities/18109" target="_blank" data-smartkarma-citation="entities:18109">Miwon Chemicals Co Ltd</a> , <a href="https://www.smartkarma.com/entities/5404" target="_blank" data-smartkarma-citation="entities:5404">Miwon Specialty Chemical Co</a> , and <a href="https://www.smartkarma.com/entities/13416" target="_blank" data-smartkarma-citation="entities:13416">Miwon Commercial Co Ltd</a> ) have been aggressively buying back shares and cancelling them boosting shareholder value.

In this report, we highlight 39 companies that have announced share buybacks in the past three months (Dec 2015 - Feb 2016) in Korea. We provide our top 9 insights and analysis regarding some of the major factors that are influencing the share buybacks in Korea. 1. Samsung Group is spearheading the entire share buybacks movement in Korea. Of the 39 companies we have identified that are conducting share buybacks in Korea, four of them are related to the Samsung Group, including Samsung Electronics Co Ltd , Samsung Fire &amp; Marine Ins , Samsung Securities Co Ltd , and Hotel Shilla Co Ltd . The total amount of share buybacks that were announced by these four Samsung affiliated companies in the past three months were 3.4 trillion won, representing 84% of the total share buybacks amount of the 39 companies in our list. We believe that the Samsung Group is accelerating its efforts to improve corporate governance (through measures such as share buybacks), faster than some of the other chaebols in Korea. 2. More companies that are buying back shares in Korea are also CANCELLING THEM. of the 39 companies in our list, eight of them (including Samsung Electronics Co Ltd,) are cancelling their shares. Historically, most Korean companies refused to cancel their shares after completing share buyback. 3. In general, the companies that have been cancelling their shares that they are buying back (eight companies we mentioned in #2) have been outperforming the market.  4. A less well known, medium sized Korean group competing in the specialty chemical sector called Miwon (including Miwon Chemicals Co Ltd , Miwon Specialty Chemical Co , and Miwon Commercial Co Ltd ) have been aggressively buying back shares and cancelling them boosting shareholder value.

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Equity Bottom-Up

<ul><li>Like many global steelmakers, BlueScope has struggled since the global financial crisis.</li><li>The company avoided diversifying into mining via top-of-the-cycle acquisitions, but BlueScope still faces stiff headwinds.</li><li>Debt-fueled acquisitions leading into the global financial crisis forced equity raisings, increasing the number of shares on issue more than four times, and some asset sales.</li><li>With the balance sheet repaired in 2013, the company is on a much firmer financial footing.</li><li>However, BlueScope lacks meaningful cost advantage and we don't believe the company's painted and coated steel, and pre-engineered building brands are moat worthy.</li><li>While improvement is likely from the horrendous 2009 to 2013 base, this already appears priced in. Competitive pressures in steelmaking mean BlueScope is unlikely to earn its cost of capital long term.</li></ul>Analysts: Mathew Hodge &amp; Mark TaylorFull report below the fold....

Like many global steelmakers, BlueScope has struggled since the global financial crisis.The company avoided diversifying into mining via top-of-the-cycle acquisitions, but BlueScope still faces stiff headwinds.Debt-fueled acquisitions leading into the global financial crisis forced equity raisings, increasing the number of shares on issue more than four times, and some asset sales.With the balance sheet repaired in 2013, the company is on a much firmer financial footing.However, BlueScope lacks meaningful cost advantage and we don't believe the company's painted and coated steel, and pre-engineered building brands are moat worthy.While improvement is likely from the horrendous 2009 to 2013 base, this already appears priced in. Competitive pressures in steelmaking mean BlueScope is unlikely to earn its cost of capital long term.Analysts: Mathew Hodge &amp; Mark TaylorFull report below the fold....

With the balance sheet repaired, BlueScope is stabilised, but significant optimism is priced in.

South Korea

Hyundai Steel Company is an electric furnace steel maker.  The Company manufactures concrete reinforcing bars, H beams, stainless steel sheets, cast steel, and other steel products.  Hyundai Steel sells its products to the domestic and overseas markets.

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Hyundai Steel (004020 KS)

With the balance sheet repaired, BlueScope is stabilised, but significant optimism is priced in.

Like many global steelmakers, BlueScope has struggled since the global financial crisis. The company avoided diversifying into mining via...

Morningstar, Inc.

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Share Buybacks in Korea - Top 9 Insights

In this report, we highlight 39 companies that have announced share buybacks in the past three months (Dec 2015 - Feb 2016) in Korea. We provide...

Douglas Kim

With the balance sheet repaired, BlueScope is stabilised, but significant optimism is priced in.

Like many global steelmakers, BlueScope has struggled since the global financial crisis. The company avoided diversifying into mining via...

Morningstar, Inc.