"Acquisition of Shares for Simple Investment Purposes"
Rising Expectations for GS Construction Stock Price Support
GS Construction CEO Heo Yoon-hong is delivering a greeting at the GS Construction Xi Re-ignite event held last November at the Xi Gallery in Daechi-dong, Gangnam-gu, Seoul. Photo by Yonhap News
BlackRock, the world's largest asset management firm, announced that it has acquired more than a 5% stake in GS Construction. Attention is focused on the reason behind accumulating GS Construction shares amid the worst conditions, including a downturn in the construction industry and political instability.
According to the Financial Supervisory Service's electronic disclosure system on the 23rd, BlackRock Fund Advisors, operated by BlackRock, disclosed on the 21st that it holds a 5.02% stake in GS Construction. Under current law, if an individual or their special related parties hold 5% or more of a listed company's shares, or if the holding ratio changes by more than 1%, they must disclose this within five business days (the 5% rule). BlackRock held a 4.93% stake in GS Construction until the 15th of this month, but after purchasing an additional 0.09% on the 16th, it made the disclosure.
This is the first time BlackRock has held more than a 5% stake in GS Construction since Heo Yunhong, son of Honorary Chairman Heo Changsoo, was appointed CEO in October 2023. Previously, in March 2023, BlackRock also disclosed holding a 5.14% stake. At that time, the purpose of holding was 'simple investment,' but on May 10 of the same year, BlackRock reduced its stake to 4.1% through on-market sales to recover investment funds. This followed an accident on April 29, 2023, when the underground parking lot collapsed at the apartment construction site in Geomdan New Town, prompting the stake reduction. GS Construction's stock price, which was 22,850 KRW per share in early March 2023, declined after the accident.
BlackRock Fund Advisors disclosed the stake because the combined shares of special related parties exceeded 5%, and it had acquisition and disposal authority. BlackRock Fund Advisors stated, "The shares were acquired for simple investment purposes." Currently, the largest shareholder of GS Construction is Heo Changsoo, Honorary Chairman of GS Group and Chairman of GS Construction, holding 5.95%. Including Heo, special related parties hold 23.64%. Following them, the National Pension Service holds about 7.4%.
As BlackRock increases its stake in GS Construction, expectations for stock price support are likely to grow. The securities industry expects GS Construction to return to profitability with an operating profit of 317.9 billion KRW last year. In 2023, the company recorded an operating loss of 387.9 billion KRW, a result of increased one-time costs due to the Geomdan apartment collapse accident.
Since the beginning of the year, GS Construction has secured redevelopment project rights worth 1.7 trillion KRW in Seoul, Busan, and other areas. It won contracts for the public redevelopment maintenance project in Jungnang-gu, Seoul’s Junghwa 5 District, valued at 649.8 billion KRW, and the redevelopment maintenance project in Suyeong 1 District, Busan, valued at 637.4 billion KRW. The Jungnang 5 District project involves constructing apartments and ancillary welfare facilities across 14 buildings, ranging from four basement floors to a maximum of 35 floors above ground, totaling 1,610 households. Construction will start in February 2029 and last for 44 months. In Suyeong 1 District, a 1,533-unit apartment complex will be built. GS Construction also secured a redevelopment contract worth 392.9 billion KRW in Manchon-dong, Suseong-gu, Daegu.
As of the closing price on the 22nd, GS Construction’s stock price was 17,470 KRW per share, a mere 0.69% increase from 17,350 KRW at the beginning of the year. A GS Construction official stated, "We believe BlackRock increased its stake with the intention of buying at a low price."
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