[AKyung Value-Up Evaluation] Doubts About Overcoming Undervaluation... "Still, the Answer Is Value-Up, Communication Is Key"

41% of Companies Respond:
"Value-up Measures Alone Cannot Resolve the Korea Discount"
The Main Reason for the Gap Between Intrinsic Value and Market Value Is
"Lack of Communication"

Some listed companies pointed out that merely implementing the contents after a value-up disclosure is insufficient to resolve the 'Korea discount' (undervaluation of the Korean stock market), and that the rewards for faithfully following the value-up program are not concrete. However, experts in the financial investment industry emphasized that "value-up disclosures and their implementation will play a key role in capital efficiency and enhancing corporate value, and continuous communication between investors and companies can sustain the momentum for value-up initiatives."

41% of Responding Companies Say "Value-up Alone Cannot Resolve Korea Discount"

On the 16th, Asia Economy conducted a survey on value-up disclosures targeting companies listed on the KOSPI and KOSDAQ. Among 73 responding companies, only three reported having made value-up disclosures (as of the end of last December). The most common reason for not yet making a value-up disclosure was "not ready yet," accounting for 41.4%, followed by 35.7% of companies who did not disclose because they believed it had no real effect on enhancing corporate value.

When asked whether implementing value-up disclosures would help resolve the Korea discount, 41.1% answered "it helps but is insufficient," the largest share. Meanwhile, 34.2% responded "it will not help," and 19.2% said "don't know." Only 4% believed it would be sufficiently helpful.

Regarding the value-up incentives proposed by the government, 59% of responding companies said "the incentives are hardly helpful." Only 6% evaluated them as "sufficient motivation," while 35% said "additional incentives are needed."

Additional incentives suggested included ▲removal of uncertainties regarding tax benefits ▲expansion of the scope of tax benefits ▲support such as marketing to strengthen global competitiveness ▲postponement of designation as a management item and reduction of penalty points ▲reduction of listing fees. Company A, which participated in the survey, pointed out that "significant benefits are needed to motivate companies to invest costs and actively participate in value-up disclosures."

Also, when asked about the minimum level of implementation expected after a value-up disclosure, 65.8% responded that "implementing more than 50% of the disclosed content is sufficient." This raises concerns that, encouraged by the government, companies might rush to disclose first and implement later, leading to patchwork disclosures.

However, some in the financial investment industry believe that only a minority of companies would excessively disclose without actually following through, as trust between companies and investors could be damaged. A financial investment industry official said, "Disclosing plans to enhance corporate value and making efforts to implement them is a process of gaining trust from investors. Over the mid to long term, companies will realize that a gap can widen between those who gain trust and those who do not."

Despite companies' perception that value-up disclosures and implementation alone are insufficient to resolve the Korea discount, the industry views value-up disclosures as playing a key role in enhancing corporate value. Lee Jung-bin, a researcher at Shinhan Investment Corp., said, "While preparing value-up plans, companies can reconsider governance improvements and capital efficiency measures. Value-up disclosures will act as a catalyst for corporate value stability and sustainable management." He added, "Disclosing corporate value enhancement plans and being included in the value-up index can increase corporate credibility, which is positive for attracting foreign investors and reducing capital costs. This directly relates to corporate value growth."

The Cause of the Gap Between Intrinsic Value and Market Value Is 'Lack of Communication'

Industry experts pointed out that the biggest problem companies may face in disclosing and implementing value-up plans is a lack of communication. Lee Sang-heon, a researcher at iM Securities, said, "It is important not only to provide quantitative information in value-up disclosures but also to establish effective communication plans. For market participants to correctly evaluate corporate value through disclosure information, communication is essential. Communication is an effective means to resolve the undervaluation of market value compared to intrinsic value."

A Korea Exchange official explained, "It is somewhat regrettable that companies not yet participating in disclosures are already worried about investors' evaluations. Even if companies do not fully achieve the disclosed targets, as long as they provide reasonable explanations, there is no risk of being considered insincere disclosure under regulations. However, companies seem to worry that failing to fully implement value-up disclosures may be viewed negatively by investors."

He added, "For the future success of the value-up program, it is important that market participants have expectations that corporate value will be enhanced and communicate sufficiently with each other. Meanwhile, the Exchange will continue to promote the value-up goal steadily without being swayed by short-term fluctuations."

This content was produced with the assistance of AI translation services.