Does the Stock Market Know First? ... Has the Golf Market Peaked?

Golf-related Stocks 'Stagger'... ETFs Also Decline
Peak-Out Concerns vs Undervalued Growth Potential
"Unaffected by Rounding Demand" Screen Golf Remains Strong

Exterior view of a golf apparel store. Photo by Yonhap News

[Asia Economy Reporter Jang Hee-jun] The stock prices of golf-related shares, which had been enjoying an unprecedented boom, are now wavering.

Although Korea's first golf-themed Exchange Traded Fund (ETF) has even appeared, voices of concern about a peak-out are already emerging in the securities industry. It is judged that the growth, which rode the pandemic's tailwind, has reached its limit. However, regardless of the decline in field rounding demand, the screen golf industry, which has established itself as a 'play culture,' is expected to continue its growth trend by successfully rebounding stock prices.

According to the Korea Exchange on the 6th, VC closed at 10,050 won the previous day. Compared to 10,900 won on May 5, it fell by 850 won (7.80%). The decline is even greater over a longer period. Compared to 14,100 won on May 6, it dropped by 4,050 won (28.72%). It is about two-thirds of the 52-week high of 15,600 won (April 20). VC is a company that manufactures and sells golf distance measuring devices and was listed on KOSDAQ in February this year.

The closing price of golf apparel company Castelbajac on the 5th was 9,190 won, down 1,560 won (14.51%) from 10,750 won a month ago. After falling to a 52-week low of 6,160 won (June 23) and showing signs of recovery, it is again on a downward curve. Kolon Industries fell 4,200 won (7.72%) from 54,400 won to 50,200 won during the same period. This is half of the 52-week high of 111,500 won recorded in September last year.

The downward trend of golf-related stocks is also signaling a red light for golf ETFs.

The HANARO Fn Golf Theme ETF closed at 7,080 won the previous day. This is a drop of 450 won (5.98%) compared to 7,530 won on May 5. After being listed as Korea's first golf-themed ETF in November last year and rising to a high of 9,755 won, it once plunged to 6,880 won and has since failed to break out of the 7,000 won range.

The HANARO Fn Golf Theme ETF invests in the top 30 domestic golf-related companies. Its returns are determined according to the golf theme index by financial information provider FnGuide. It was listed by NH-Amundi Asset Management. However, contrary to expectations, it has shown a continuous decline, leading to a skeptical view that it has become an indicator of the limitations of the golf industry.

In the case of theme ETFs, stocks that receive high evaluations in the market even before listing are mainly included. This means that some risk factors are already anticipated since their popularity has been verified. However, the peak-out concerns spreading in the market are serious. It appears that the investment sentiment reflects worries that domestic golf popularity will wane as rounding demand shifts overseas.

Golfzon GDR Academy. Photo by Golfzon

On the other hand, some predict that the golf industry will overcome undervaluation and continue its growth trend.

Leading the optimism is Golfzon, regarded as the 'golf leader stock.' Golfzon's stock price rose to the 180,000 won range early this year but faced a six-month correction amid concerns that growth would slow with the resumption of overseas travel. In May, it hit a 52-week high of 186,300 won but plunged to a 12-week low of 126,700 won within two months, showing unstable rapid fluctuations.

Golfzon closed at 137,500 won the previous day. It is recovering its upward trend since the closing price of 128,500 won on the 1st, two trading days ago. This is partly attributed to Golfzon Commerce, a group affiliate, passing the preliminary review for KOSDAQ listing by the Korea Exchange. Expectations that strong performance will continue in the second half of this year, following last year, also seem to have contributed to the stock price rebound.

According to FnGuide, Golfzon's operating profit for the third quarter is expected to be 45.6 billion won, a 23% increase compared to the same period last year. There is also analysis that its value as a platform operator is undervalued. Golfzon's membership recently exceeded 4 million. It is difficult to assume that the demand for screen golf will decline just because the demand for field rounding decreases.

NH Investment & Securities recently released an analysis reflecting this outlook. Baek Joon-gi, a researcher at NH Investment & Securities, said, "Despite good performance, Golfzon's stock price continues to lag due to doubts about sustained growth amid the golf industry's slowdown and low expectations for overseas growth," adding, "The strong third-quarter performance will alleviate peak-out concerns."

He continued, "Golfzon is still a platform operator that can expand its domain within the golf industry, and even if classified as a franchise business, it is extremely undervalued. Considering that Golfzon's overseas sales have grown by more than 30% annually since 2018, expectations for overseas sales growth are also valid. Sales rebounds in the U.S. and China will be significant in the second half of the year," he analyzed.