[Click eStock] "Shinsegae I&C, Core Business and New Ventures Sailing Smoothly... Need to Enhance Shareholder Value"

Hanyang Securities Report

[Asia Economy Reporter Minji Lee] Hanyang Securities maintained a buy rating on Shinsegae I&C on the 8th and set a target price of 290,000 KRW, down 9%. Although the core business and new ventures are progressing smoothly, investment sentiment recovery is restrained due to concerns over a block deal of treasury shares.

In October, the company signed an MOU for an electric vehicle charging infrastructure business with Amano Korea, a parking management system company. Amano Korea is the market leader in parking control and parking lot operations, managing over 15,000 parking lots. The company expects to secure additional parking space, which is key to the charging business, through collaboration with Amano Korea alongside parking lots already secured from affiliated companies such as large discount stores and department stores.

Yongho Kim, a researcher at Hanyang Securities, said, “The fully unmanned convenience store is also progressing well, having opened its second branch at COEX Starfield,” and added, “It is understood that aggressive investments such as mergers and acquisitions using net cash of 67.8 billion KRW and treasury shares worth 69.7 billion KRW are also being considered to expand new businesses.”

In the third quarter, the company posted sales of 132.6 billion KRW and operating profit of 8.4 billion KRW, growing 15.2% and 16.6% respectively compared to the same period last year. The IT services sector led the company’s performance with a 26.7% increase year-on-year. The strong performance in IT services is estimated to be due to increased domestic sales to companies like E-Mart and Shinsegae as well as growth in external sales. IT distribution grew slightly by about 2%, but sales volume was sluggish due to inventory shortages caused by semiconductor supply instability.

Looking at the recent stock price trend, it reversed into a downward trend after mid-September. Despite expectations for new businesses and valuation attractiveness, the main cause of the sharp decline is understood to be overhang concerns due to a large volume of remaining treasury shares. Since acquiring 500,000 treasury shares in April last year, the company has sold a total of 180,000 shares off-market through four block deals. The remaining treasury shares amount to 405,000 shares, and the possibility of additional block deals poses a risk factor for the stock price.

Researcher Yongho Kim said, “Enhancing shareholder value seems necessary to restore investment sentiment,” adding, “The existing investment points such as growth and profitability improvement in the core business and expectations for new businesses remain intact.”