Will the Stock Price of the Parent Company, Which Has Been Discounted for Years, Finally Shine?

9 out of 12 Major Holding Companies See Stock Price Increase This Year
Factors Include Secondary Battery Boom, Activist Funds, and Management Disputes
Holding Companies' Investor Sentiment Expected to Improve with Anticipated Interest Rate Cuts Next Year

Recently, the stock prices of holding companies have shown strength fueled by various issues, drawing attention to whether they can break free from being 'perennially undervalued stocks.' In particular, next year is expected to create a positive environment for holding companies due to interest rate cuts, raising expectations that their stock prices may escape undervaluation.

According to financial information provider FnGuide on the 19th, the stock prices of 9 out of 12 major holding companies increased compared to the end of last year.

The holding company with the largest stock price increase is Ecopro, the holding company of the Ecopro Group. As of the closing price on the 15th, Ecopro's stock price surged 525.24% year-to-date. Other companies recording double-digit gains include POSCO Holdings (73.60%), SK Square (52.31%), LS (29.41%), CJ (14.27%), Samsung C&T (13.92%), which effectively serves as Samsung Group's holding company, Korea & Company (13.62%), and LG (11.91%).

Ecopro, POSCO Holdings, and LS saw significant stock price increases riding the wave of the secondary battery boom that swept the stock market this year. Ecopro's stock price, which was in the 100,000 KRW range at the end of last year, at one point exceeded 1.5 million KRW, making it one of the most notable stocks in this year's market.

In some cases, management disputes have led to stock price increases for holding companies. Recently, Korea & Company's stock price fluctuated due to a sibling management dispute. Korea & Company's stock price, which hit a 52-week low of 100,300 KRW intraday on August 25, showed a sharp rise recently, surpassing 20,000 KRW amid the management conflict. On the 5th, MBK Partners announced that it would conduct a public tender offer for 20.35% to 27.32% of Korea & Company's shares together with Cho Hyun-sik, the eldest son of honorary chairman Cho Yang-rae, by the 24th, which caused Korea & Company's stock price to soar to the upper limit.

Samsung C&T's stock price was stimulated by pressure from activist funds. The UK-based activist fund Palisade Capital demanded improvements in governance, including share buybacks, board diversification, and restructuring into a holding company system, citing a $25 billion (approximately 32.43 trillion KRW) gap between Samsung C&T's stock price and intrinsic value on the 6th. Last month, another UK-based fund, City of London Investment Management, requested Samsung C&T to increase its dividend per share from 2,300 KRW last year to 4,500 KRW this year and to repurchase shares worth 500 billion KRW by next year. Recently, the US-based activist hedge fund Whitebox Advisors reportedly demanded the introduction of a clear capital allocation plan. Reflecting ongoing activist fund attacks, stock price revaluation, and expectations for active shareholder returns, Samsung C&T's stock price showed an upward trend. On the 14th, Samsung C&T's stock price reached an intraday high of 135,000 KRW, marking a 52-week high.

Next year, with expected interest rate cuts, a positive environment is likely to be created for holding companies, and investment sentiment toward holding companies is also expected to improve significantly. Kim Jang-won, a researcher at BNK Investment & Securities, said, "Holding companies, which are greatly affected by stock market liquidity, are hard to attract attention in a high-interest-rate environment, but if the interest rate trend reverses, the investment sentiment toward holding companies could improve significantly just on the expectation of a directional change."

Interest rate cuts are also expected to make the financial structure improvements of holding companies more visible. Lee Sang-heon, a researcher at Hi Investment & Securities, said, "In a high-interest-rate environment, holding companies that directly invest in shares or subsidiaries that undertake large-scale investments face very high financial costs for securing investment funds, which negatively affects the financial structure of holding companies." He added, "As interest rates are expected to fall due to the weakening of expectations for further rate hikes amid slowing inflation, the burden of high interest rates will ease, making financial structure improvements of holding companies more visible."