National Pension Service, Focused on Games and Semiconductors in Q1

Among stocks with over 5% ownership
NHN at 10.8%, increased by 3.6%P
Game time rises due to COVID-19
Expectations for significant profit growth
Hanmi Semiconductor also up to 10.3%

COVID-19 hits SK Rent-a-Car and CGV
Ownership reduced by 5.2% and 4.45%P respectively

[Asia Economy Reporter Park Jihwan] The stocks that received the most love from the National Pension Service (NPS) in the first quarter of this year were NHN, Amotech, and Hanmi Semiconductor. Despite the stock market downturn caused by the novel coronavirus disease (COVID-19), the NPS appears to have heavily invested in game-related stocks, which were less affected, and semiconductor-related sectors expected to have relatively solid performance.

On the 10th, financial information company FnGuide analyzed the changes in NPS's disclosed shareholdings up to the 7th of this month. Among stocks where NPS holds more than 5% of shares (common stock basis), the largest increases in shareholding were NHN (7.20%→10.80%), Amotech (5.14%→8.64%), and Hanmi Semiconductor (7.09%→10.30%). These stocks are those for which the securities industry has issued positive outlooks despite the impact of COVID-19.

The NPS increased its stake in NHN by 3.6 percentage points from 7.20% at the end of last year to 10.80% recently. NHN’s game business segment has recently attracted attention for profit growth. This is because a significant profit increase is expected this year due to the relaxation of web board game regulations and increased game usage time caused by COVID-19. In particular, the relaxation of web board game regulations is noteworthy. On the 7th, the revised enforcement decree of the Game Industry Promotion Act, which includes easing the daily loss limit and 24-hour access block regulations for web board games, was promulgated, and an increase in web board game sales is expected from the second quarter.

Samsung Securities researcher Oh Donghwan commented, "With high-margin game sales growth, a nearly 40% profit increase compared to last year is expected this year," adding, "Recently, COVID-19 has rapidly spread in Japan as well, so a second-quarter sales rebound effect in the Japanese game market is also possible."

The NPS also expanded its stake in Amotech, which produces multilayer ceramic capacitors (MLCC) and other core components for semiconductors and electronic devices, from 5.14% to 8.64%, an increase of 3.50 percentage points. Go Euiyoung, a researcher at Hi Investment & Securities, said, "MLCC supply will continue to expand in the mid to long term alongside 5G infrastructure investment," and added, "Long-term growth could begin starting this year."

Hanmi Semiconductor’s large-scale treasury stock cancellation and expectations for improved performance were cited as reasons for the NPS’s investment. As of the 7th, the NPS holds 5,304,565 shares, representing a 10.3% stake in Hanmi Semiconductor. Compared to two weeks ago on the 24th of last month, this is an increase of 113,424 shares or 0.22 percentage points. Compared to 4,055,475 shares at the end of last year, the number of shares increased by 1.25 million in just three months.

Hanmi Semiconductor has already signaled growth with 10 equipment order contracts since the beginning of the year. To enhance shareholder value, it also carried out a treasury stock cancellation of approximately 5.72 million shares at the end of January. Supported by rising memory prices since the start of the year, the outlook for semiconductor performance improvement is also favorable. Additionally, Hwaseung Ind. and Kyungdong Navien also saw increases in NPS holdings by 2.70 percentage points and 2.52 percentage points, respectively.

On the other hand, the NPS sold many shares in sectors heavily impacted by COVID-19, such as hotels and leisure. SK Rent-a-Car’s NPS stake dropped significantly from 13.67% at the end of last year to 8.47%, a decrease of 5.2 percentage points. CJ CGV’s stake also decreased by 4.45 percentage points due to COVID-19 and losses in overseas operations.

Stocks with negative earnings outlooks were also targets for NPS divestment. For example, Hyosung Heavy Industries, which is facing concerns over operating losses, saw its stake reduced from 9.96% to 5.39%. Hyosung Heavy Industries’ sales and operating profit in the first quarter of this year are expected to plunge by 16.7% and 82.0%, respectively, compared to the previous year.

Lee Donghwan, a researcher at Daishin Securities, explained, "Due to the impact of COVID-19 and falling oil prices, overseas orders are being postponed, making a sales decline inevitable for the time being, and the domestic construction market is also significantly affected by the downturn."