[Into the Stocks] Hyundai Department Store's Transition to Holding Company, Mixed Views in Securities Circle

Investment-Business Division Human Split
Positive Evaluation for Enhancing Shareholder Value
Analysis of Negative Impact on Investor Sentiment Due to Lack of Justification

[Asia Economy Reporter Lee Myunghwan] The securities industry is divided in its evaluation of Hyundai Department Store, which announced its transition to a holding company system.

According to the Financial Supervisory Service's electronic disclosure system (DART) on the 19th, Hyundai Department Store Group announced on the 16th that it would split its main affiliates, Hyundai Department Store and Hyundai Green Food, through a spin-off into an investment division (holding company) and a business division (operating company).

Following the decision to transition to a holding company, Hyundai Department Store announced on the same day that it would be spun off into a newly established company, Hyundai Department Store Holdings (23.24%), and the existing company, Hyundai Department Store (76.76%). Hyundai Department Store Holdings will be the holding company with Hyundai Department Store and Hanmu Shopping as its subsidiaries.

The split of the two companies is scheduled to be finalized on March 1 of next year after an extraordinary general meeting of shareholders scheduled for February. Hyundai Department Store Group explained that this transition to a holding company is aimed at establishing transparent governance and maximizing shareholder value. It also emphasized that it is not considering the possibility of separating affiliates.

The securities industry has given mixed evaluations regarding the reasons Hyundai Department Store cited for the transition to a holding company system: establishing governance and maximizing shareholder value.

Those who view the transition positively analyzed that it is expected to enhance shareholder value. Younghoon Joo, a researcher at NH Investment & Securities, said, "It seems likely that the dividend payout ratio of subsidiaries will increase to secure funds such as additional share purchases by Hyundai Department Store Chairman Chung Euisun," adding, "From the perspective of Hyundai Department Store shareholders, the expansion of shareholder return policies is expected to enhance shareholder value."

Orina, a researcher at eBest Investment & Securities, also evaluated, "After the split, the dividend policy will be based on increasing the dividend levels of the two companies compared to the existing single Hyundai Department Store," adding, "Since Hyundai Department Store's cash-generating ability is superior within the industry, it is possible to expect securing proactive growth engines through maximizing efficient resource allocation."

On the other hand, there are harsh criticisms that the rationale for this system change is insufficient and that it will negatively affect investment sentiment. Myungjoo Kim, a researcher at Korea Investment & Securities, said, "There is a lack of clear rationale for establishing the holding company of Hyundai Department Store and no concrete shareholder value enhancement policy," predicting, "The announcement of the holding company establishment will be negative for investment sentiment."

There is also an evaluation expressing regret over the separation of the affiliate Hanmu Shopping. Hanmu Shopping is a joint venture between Hyundai Department Store and the Korea International Trade Association and is a subsidiary of Hyundai Department Store. Jinhyup Lee, a researcher at Yuanta Securities, forecasted, "The separation of Hanmu Shopping from the operating company will cause a split of the department store business division, which has already been evaluated," adding, "This could act as a negative factor for corporate value."