Market Cap < Cash < Land Value... Seongnam-si Headquarters Site Estimated Worth Trillions
PBR Expected to Decrease Further Upon Asset Revaluation
Business Value to Grow with Secured Growth Drivers
The government is set to announce specific measures for the 'Corporate Value-Up Program' within this month, drawing attention to Samyoung Electronics. Samyoung Electronics holds cash reserves exceeding its market capitalization and has not revalued its assets since the 2000s, resulting in a significant gap between the book value and the actual value of its land holdings.
According to the financial investment industry on the 2nd, Samyoung Electronics' stock price rose by 27.8% from the 2nd of last month until the day before.
Jung Hong-sik, a researcher at Ebest Investment & Securities, analyzed Samyoung Electronics as undervalued relative to its asset value at the beginning of this year. He explained, "As of the end of the third quarter last year, it holds net cash of 290.3 billion KRW," adding, "which exceeds its market capitalization."
As of the end of the third quarter last year, Samyoung Electronics' total assets amounted to 553.9 billion KRW, and its market capitalization has surged to 219 billion KRW due to the recent sharp rise in stock price. It is a listed company in the domestic stock market with a price-to-book ratio (PBR) below 1, a key investment indicator. The book value per share (BPS) was 26,600 KRW based on last year's estimates, and as cash steadily increases, the BPS continues to rise.
Samyoung Electronics conducted asset revaluations in September 1976, September 1983, and April 1999. The revaluation surpluses were 7.3 billion KRW, 5.2 billion KRW, and 125.7 billion KRW, respectively. As of the end of the third quarter last year, revaluation reserves amounted to 118.7 billion KRW.
Having not revalued assets for over 20 years, there is likely a large discrepancy between the book value and actual value. Samyoung Electronics owns a headquarters site of 77,704.6㎡ in Sangdaewon-dong, Jungwon-gu, Seongnam-si, Gyeonggi-do. This is similar in size to the Korea Electric Power Corporation (KEPCO) site of 79,342㎡, which Hyundai Motor Group purchased for 10.55 trillion KRW in 2014.
The publicly announced land price for the Sangdaewon-dong headquarters site is 1,578,000 KRW per square meter. Even based solely on the official land price, it amounts to 122.6 billion KRW. Samyoung Electronics also owns land in Pyeongtaek-si as well as Seongnam-si. The book value of the land held is only 65.5 billion KRW.
Previously, in 2003, Samyoung Electronics sold 26,547.2㎡ of land and buildings in Sujeong-gu, Seongnam-si, for 70 billion KRW. At that time, as Sinheung-dong became urbanized, the company relocated to a new factory in nearby Sangdaewon-dong. This is a useful reference for estimating the current value of the headquarters site, which is nearby. The official land price for the headquarters site in 2003 was 468,000 KRW per square meter. While the official land price has increased 2.3 times, no asset revaluation has been conducted. Around 2010, analyses suggested the value could reach 200 billion KRW due to favorable location conditions. If asset revaluation were performed, the PBR could decrease further.
The financial investment industry advises that when seeking beneficiaries of the government's corporate value enhancement policy, selective approaches should be taken toward listed companies with high retained earnings that can serve as resources for shareholder returns, rather than simply undervalued companies. Ko Kyung-beom, a researcher at Yuanta Securities, said, "A low PBR does not necessarily lead to shareholder return policies such as dividends or share buybacks," adding, "Ultimately, it depends on the resources available for returns."
The government's planned Corporate Value-Up Program will apply to all listed companies on the KOSPI market and 150 companies listed on KOSDAQ. The core of the program is to publicly disclose companies with low PBR indicators that have not announced plans to enhance corporate value. Companies with a PBR below 1 are expected to be targeted.
Once the government fully implements the Value-Up Program, calls for strengthening dividends and other shareholder value enhancement measures for listed companies are expected to grow. This is why companies like Samyoung Electronics, which have solid financial structures and large cash holdings, are attracting attention. Samyoung Electronics earned over 8 billion KRW in interest income from its cash holdings alone up to the third quarter last year, exceeding the total cash dividend of 6 billion KRW decided at the shareholders' meeting in March last year.
Samyoung Electronics has increased the possibility of performance improvement through steady investment. Researcher Jung Hong-sik said, "According to Samyoung Electronics' plan, continuous expansion will follow for 2 to 3 years after setting up initial production facilities in 2025," and "By 2028, it is expected to handle up to 80% of the hybrid capacitor demand from domestic complete vehicle front-end customers." He added, "Hybrid capacitors are applied in ADAS cameras, head-up displays, telematics necessary for autonomous driving," and "They will mainly be supplied to electric and hybrid vehicles requiring high capacity within the vehicle in the future."
Researcher Kim Do-yoon of Research Alme said, "Hybrid capacitors have high demand for automotive electronics and are also installed in robots, drones, and IoT industrial devices," and "Automotive and SSD capacitors have high profit margins, so profitability improvement is expected with an increased sales ratio." He added, "Assets amount to 553.9 billion KRW, and liabilities are only 19.4 billion KRW," and "Retained earnings alone reach 372.4 billion KRW, indicating a stable business structure." He estimated sales of 215.2 billion KRW and operating profit of 13.6 billion KRW this year.
There is a growing expectation that the market capitalization will exceed asset value as growth potential is proven through performance. A financial investment industry official explained, "Samyoung Electronics has been undervalued relative to asset value, including long-held cash," and "If the management discloses plans to enhance corporate value through the government's Value-Up Program, the effect could be significant." He added, "With strong government will and increasing shareholder voices, not only large corporations but also mid-sized companies are expected to present shareholder value enhancement plans one after another."
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