[Corporate Exploration] Ace Bed, Quality 'A'... Stock Dispersion Remains a Challenge

Steady Increase in Sales and Operating Profit Based on Technical Skills
Chairman An Yusu and CEO An Seongho Hold Nearly 80% Stake
Most Dividends Concentrated with Chairman An's Family

Due to the impact of COVID-19, the time spent at home increased last year. As demand for changing furniture and beds grew, the related market also expanded. According to Statistics Korea, the domestic home furnishing market size is expected to grow from 13 trillion won in 2016 to 18 trillion won in 2023. With rising national income, westernization of lifestyles, and products focused on design and functionality leading the market, the bed market has emerged as a highly growth-oriented industry. Competition within the mattress market, in particular, is intensifying. The domestic mattress industry is competed by Ace Bed, Simmons, Geumseong Bed, and Daejin Bed, among others. Asia Economy examines the business structure and competitiveness of Ace Bed, the number one company in the domestic bed market, and Zinus, which is prominent in overseas markets.

[Asia Economy Reporter Park Hyungsoo] Ace Bed, the number one brand in the domestic bed industry, continues to maintain stable growth. As the bed market steadily grows, Ace Bed develops beds that align with market trends to attract consumer choice.

Ace Bed was established in 1963 as Ace Bed Industrial Company and changed its name to the current one after incorporation in 1977. It is engaged not only in manufacturing beds and furniture but also in real estate sales and leasing. In 1992, it established the Bed Engineering Research Institute to continuously conduct research for developing comfortable beds. The institute develops new mattress materials and springs, evaluates durability according to spring changes, and tests physical properties of memory foam for new products. It also conducts research and development on various functional fiber materials and sponges to produce high-quality internal materials.

In September 2006, the Bed Engineering Research Institute was recognized as an internationally accredited testing institution by the International Technology Standards Institute. It is equipped with state-of-the-art research facilities such as durability testers, damping testers, roller testers, polysomnography, and four-axis load testers.

Through long-term research and development, Ace Bed developed the 'Hybrid Z Spring,' which aids deep sleep, and obtained patents in 15 countries including the United States, European Union (EU), Canada, Japan, Korea, and China. One of the critical factors for achieving deep sleep while sleeping on a bed is the elasticity of the mattress spring, which reduces energy consumption. Ace Bed applied the Hybrid Z Spring to mattresses to reduce sagging, noise, gaps, shaking, and shifting. Using brass-plated high-tensile steel wire, it also considered hygiene inside the bed by inhibiting microbial growth, sterilization, and rust prevention.

Last year, as time spent at home increased due to COVID-19, demand for beds also rose. Considering the increase in single-person households prioritizing rest and the growing demand for home decoration, Ace Bed launched the modular bed 'Dado (DADO)'. The Dado product comes in three sizes: Single (SS), Double (DD), and Large Queen (LQ), allowing consumers to configure and arrange sizes and quantities flexibly according to their needs.

Newlywed couples with different sleeping habits can use two single beds joined as a twin type for individual deep sleep or combine a single and a large queen to use as a family type. When children grow up, the single beds can be separated.

Through continuous technological development and brand awareness enhancement, Ace Bed has maintained stable growth. Sales steadily increased from 277.4 billion won in 2019 to 289.5 billion won in 2020 and 346.4 billion won in 2021. Operating profit also rose from 49.9 billion won to 76.8 billion won during the same period.

Ace Bed is also committed to 'Environmental, Social, and Governance (ESG)' management. In the environmental (E) sector, it introduced eco-friendly production facilities. It uses 'E0' grade materials with formaldehyde emissions close to natural levels and produces key mattress materials in-house. It received environmental mark certification for mattresses from the Korea Environmental Industry & Technology Institute under the Ministry of Environment.

In the social (S) sector, it continues social contribution activities. Since 2003, it has built and operated the Ace Senior Center in Icheon, Gyeonggi Province, providing free lunches daily for the elderly. Due to COVID-19, food service was suspended, and instead, it donated quarantine supplies to Icheon City's 'Happy Companion' program.

In the governance (G) sector, some improvements are needed. The Korea Exchange KOSDAQ Market Headquarters announced on the 11th of last month that Ace Bed could be designated as a management item. According to the '2021 Business Report' submitted by Ace Bed, the number of shares owned by minority shareholders is only 858,858 shares (7.74%), with the number of circulating shares falling below one million. In 2018, it was also designated as a management item for failing to meet stock dispersion standards but resolved the issue through stock splits and disposal of treasury shares.

The reason for the low number of shares held by minority shareholders is the high shareholding ratio of founder Chairman Ahn Yusu and his son, CEO Ahn Seongho. The largest shareholder, CEO Ahn Seongho, holds 74.56%, and Chairman Ahn Yusu holds 5.00%. Corresponding to their high shareholding, they receive significant cash dividends annually. Last year, the dividend per share was 1,330 won, and out of the total dividend amount of 10.7 billion won, 8.8 billion won was received by Chairman Ahn and CEO Ahn. Chairman Ahn received 1.47 billion won in salary and 270 million won in bonuses last year, totaling 1.74 billion won in compensation. Unless some of the shares held by Chairman Ahn or CEO Ahn are released to increase circulating shares, the issue of management item designation will continue to arise.