Value-Up Disclosures Still Cautious... Activity Expected to Pick Up in Second Half

Watching the July Tax Law Revision
Stock Prices Diverge Among Listed Companies Announcing Value-Up Disclosures

It has been a month since the second Value-Up guideline was announced at the end of May, but listed companies have shown lukewarm responses regarding participation in the corporate value enhancement plan disclosure. To make a Value-Up disclosure, companies must establish mid- to long-term management goals based on financial indicators, and since it is voluntary, listed companies do not feel the need to rush. The industry expects that participation in Value-Up disclosures will become more active in the second half of the year, when the direction of tax reform becomes clearer and second-quarter earnings are finalized.

According to the Korea Exchange on the 26th, as of the 25th, six listed companies have disclosed corporate value enhancement plans: Kiwoom Securities, KB Financial Group, DB HiTek, Kolmar Holdings, and Woori Financial Group. Among them, KB Financial Group, Woori Financial Group, and DB HiTek have issued preliminary disclosures stating they will prepare corporate value enhancement plans within the third to fourth quarters, so the companies that have actually revealed their plans are Kiwoom Securities and FnGuide.

However, the Korea Corporate Governance Forum gave Kiwoom Securities, the first domestic listed company to disclose a Value-Up plan, a grade of C, pointing out that "the details are largely insufficient and there is no sign of deep consideration." This was because most of the disclosure content overlapped with the corporate value enhancement measures announced by the company in March. The absence of key Value-Up guideline elements such as cost of equity capital and total shareholder return was also cited as a reason for the low evaluation.

Within a week after the final Value-Up guideline was announced, KB Financial Group, Kiwoom Securities, and DB HiTek successively disclosed their Value-Up plans, attracting market attention. However, after June, no further disclosures were made until mid-month when manufacturing listed companies DB HiTek and Kolmar Holdings joined the Value-Up disclosure ranks. On the 24th, Woori Financial Group became the second financial holding company to disclose its plan.

The industry points to the uncertainty surrounding the incentives promised by the government as a reason for the lack of active participation by listed companies. Some incentive items, such as tax benefits and exemption from periodic designated audits, have not been finalized, making it difficult for companies to actively disclose Value-Up plans that could lead to changes in management policies. Participation is relatively active among financial holding companies with high foreign ownership.

A representative from one of the top five domestic financial holding companies said, "Due to the nature of the disclosure requiring mid- to long-term management goals, it is difficult to finalize the Value-Up disclosure content in a short period. Also, to differentiate from other financial holding companies that have already announced their plans, it is expected to take considerable time to review the disclosure content because it must include not only shareholder return details but also financial indicators such as return on equity (ROE)."

Participation in Value-Up disclosures is expected to gain momentum in the second half of the year. Once the tax reform details are finalized and the second-quarter earnings announcements are completed, the environment will be more conducive to establishing corporate value enhancement plans. The tax law amendment bill prepared by the Ministry of Economy and Finance is usually announced at the end of July, followed by finalization through National Assembly discussions.

Meanwhile, the stock price trends of listed companies that have disclosed Value-Up plans have been mixed. As of the 24th from the day of disclosure, except for DB HiTek (33%), KB Financial Group (4%), and Kolmar Holdings (2.4%), stock prices have rather declined. DB HiTek’s stock price increase appears to be driven more by news of semiconductor contract manufacturing for Tesla than by the Value-Up disclosure. Woori Financial Group’s stock price rose about 2.7%, from 14,240 won on the 21st to 14,630 won on the 25th, following its Value-Up plan disclosure on the 24th.