© Reuters. “Revaluing a shareholder-friendly company” Where is the second merit?
Companies strengthening shareholder-friendly policies, such as treasury share retirements and governance reshuffles, are attracting attention. Three Meritz Group companies, which announced measures to improve shareholder value, rose to the maximum limit. With this case as an opportunity, some predict that shareholder-friendly companies will begin to be re-evaluated. Enlarge Image Shareholder-Friendly Endgame Where? On the 22nd, Meritz Financial Holdings closed at 34,750 won, up to the price limit (29.91%). Meritz Fire & Marine (29.97%) and Meritz Securities (29.87%) also finished trading at the upper limit. The previous day, Meritz Financial Holdings announced that it would incorporate Meritz Fire & Marine Insurance and Meritz Securities as 100% subsidiaries. Meritz Securities and Meritz Fire & Marine go unlisted.
In addition, it announced that it would use more than 50% of its net profit for at least three years for dividends and the buyback and cancellation of treasury shares. By simple calculation, about 700 billion won (based on last year’s performance) is invested in shareholder returns every year.
Lee Chae-won, chairman of Life Asset Management, said, “As interest in corporate governance grows and minority shareholder protection systems are strengthened, shareholder-friendly policies are strengthened.”” he explained.
SK Holdings is considered a representative company where the interests of major shareholders and minority shareholders coincide. SK Group’s stock price accounts for 50% of its affiliates’ CEO performance evaluation (KPI). When the stock prices of subsidiaries rise, the shareholders of SK Holdings, the holding company, benefit.
In December last year, SK Corporation absorbed and merged with SK Materials, which was ranked 8th in market capitalization in the KOSDAQ market. By eliminating overlapping lists of subsidiaries, the value of the company was raised. In March, it also announced its plan to buy back at least 1% of its market capitalization as treasury stock every year until 2025.
It plans to buy back and strategically retire 200 billion treasury shares by March next year. The expected dividend yield this year is 3.94%. LS·POSCO Holdings also attracts attention LS, POSCO Holdings, KB Financial Group (KS:), and Shinhan Financial Group are also considered shareholder-friendly companies. LS owns major subsidiaries such as LS Nikko Copper, LS Cable, LS I&D, and LS Mtron as unlisted companies. At the end of last year, these subsidiaries accounted for more than 76% of LS Group’s total sales.
A holding company receives a discount due to duplicate listings from its subsidiaries. Analysts say that most of LS are unlisted companies, so there is no factor to accept a discount. Based on this year’s expected earnings, LS’s price-to-earnings ratio (PER) is 5.8x, which is undervalued. In August, it decided to acquire treasury stock worth 19 billion won.
KB Financial bought back 300 billion in treasury shares this year and retired them. Shinhan Financial Group is also in the process of repurchasing and canceling 300 billion won worth of treasury shares. Treasury stock retirement is known as the end of a shareholder-friendly policy because it increases the value of shareholders’ equity and increases the company’s return on equity (ROE).
POSCO Holdings has also canceled 672.2 billion worth of treasury shares acquired this year. This is the first time since 2004 that POSCO Holdings has canceled its treasury stock. KT&G announced that it would invest 2.75 trillion won in dividends and share buybacks over the next three years from last year. This year, it will spend 350 billion won to buy back its own stock.
Exchange traded funds (ETFs) that invest in shareholder-friendly companies have also been launched. BNK Asset Management launched the ‘BNK Shareholder Value Active ETF’, which invests in companies that pay cash dividends and buy back their own stocks at the same time. Invest in companies with high dividend yields and high share buybacks relative to the number of shares listed.
Reporter Park Eui-myung uimyung@hankyung.com
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