Korean Stock Picks (December 2024)
KEPCO, Daesang Corp, E-Mart, Hyundai Motor, Kia Corp, SK Telecom, Woori Financial, LG Electronics, Lotte Shopping, KT Corporation, Doosan Bobcat, Doosan Enerbility, Doosan Robotic, KB Financial, etc.
As mentioned in our last Korean post, I can’t add much insight into what has been happening in Korean politics over the past few months beyond reiterating this tweet and two articles already covered in our Monday posts:
🇰🇷 ‘Revenge cycle’: South Korean crisis highlights deep political divide (FT) $ 🗃️ December 5, 2024
Dramatic attempt to impose martial law exposes vulnerabilities in highly polarised democracy
🇰🇷 The historical traumas driving South Korea’s political turmoil (FT) $ 🗃️ December 8, 2024
President Yoon Suk Yeol’s surprise martial law declaration prompted a swift response from protesters schooled in previous fights over democracy
Like with India, a potential positive for the Korean market is the large presence of local retail investors - but the FT recently noted they have been following the herd into US stocks:
🇰🇷 South Korean investors pile into US equities as domestic stock market languishes (FT) $ 🗃️ January 2, 2025
Retail investors expect Trump rally to continue and Tesla is a favourite with Musk praising country’s ‘smart people’
She is not alone. Many of the country’s 14mn individual investors, known as “ants”, who account for half of average daily turnover compared with 30 per cent for foreigners, have turned to overseas markets for higher returns, frustrated with the “Korea discount” of chronic undervaluations.
About two-thirds of companies in the Kospi trade at a price-to-book ratio of less than one, meaning they are valued below the stated worth of their net assets.
🇰🇷 South Korea’s political shock will reverberate for markets (FT) $ 🗃️ December 4, 2024
Local stocks will have to price in a higher political risk premium to keep investors onboard
However and in spite of all the political noise, there are potentially positive catalysts for the Korean market that are being overlooked (covered in our Monday posts over the past month or so) beginning with the local public pension fund buying local stocks:
💻 NPS: Portfolio Rebalance Could Lead to Buying At Least 25 Trillion Won in Korean Stocks in 2025 (Douglas Research Insights) $ Dec 24, 2024
In 2025, the [National Pension Service] NPS could purchase significant amounts of Korean stocks (at least 25 trillion won) which could act as support in the domestic stock market.
At the end of September 2024, NPS's domestic stock portfolio was 12.7% of its total assets, a 2.2% lower than NPS's domestic stocks target at the end of 2025 (14.9%).
The top five net purchases by the NPS and local pension funds of Korean stocks in the past one month include Samsung Electronics (KRX: 005930 / 005935 / LON: BC94 / FRA: SSUN / OTCMKTS: SSNLF), Kakao [Kakao Corp (KRX: 035720)?], SK Innovation (KRX: 096770 / 096775), Hyundai Motor (KRX: 005380 / FRA: HYU / OTCMKTS: HYMTF), and Samsung Electro-Mechanics Co Ltd (KRX: 009150 / 005935).
And some progress with the Corporate Value Up program and other reforms that are being passed (despite the political chaos…):
💻 Surging Share Buybacks in Korea in 2024 (Douglas Research Insights) $ December 30, 2024
Capitalizing on the lower share prices combined with the government's pressure for Corporate Value up improvements, the share buybacks surged in Korea in 2024.
As of 27 December 2024, the total treasury shares planned acquisition amount by Korean companies increased by 215% YoY to 11.83 trillion won in 2024.
There have been some mixed share price performances among the companies announcing meaningful share buyback/cancellation announcements this year.
💻 Change in Regulation of Treasury Shares Allocation Post Spinoffs Starting January 2025 (Douglas Research Insights) $ December 24, 2024
Starting January 2025, there will be a major change in the regulation regarding the use of treasury shares during a company spinoff process.
The main change involves the practice of allocating newly issued shares to existing treasury shares held by companies during corporate spinoffs.
This practice will now be banned which should help to reduce the wrongful use of treasury shares and improve minority shareholders' rights.
💻 Dividend Procedure Improvement Plan in Compliance with Global Standards Is Passed into Law (Douglas Research Insights) $ December 27, 2024
Amid chaos in Korean politics (including impeachment of the Acting President Han Duck Soo), the FSC announced that the change in the procedure for quarterly dividends was passed into law.
The main change that has been made is that the the investors will know in advance how much they will receive in quarterly dividends.
Amid market turmoil, numerous high dividend paying stocks such as Hankook & Company [Hankook Tire & Technology Co Ltd (KRX: 161390)?], HD Hyundai Electric Co Ltd (KRX: 267260), and KT Corp (NYSE: KT / KRX: 030200 / FRA: KTC) have been outperforming the market this year.
Stocks covered in the rest of this post (with a short description from our continuously updated Japan, Korea & Taiwan Stock Index plus price/book, forward P/E, forward dividend yield, and a long term technical chart):
[Note: On desktop browsers, an autogenerated table of contents will appear on the left side linked to each stock. I will add those links below after publishing/emailing this post…]
KEPCO, Daesang Corp & Daesang Holdings, E-Mart, POSCO Holdings & Posco International Corp, Korea Zinc, Hyundai Motor & Kia Corp, SK Telecom, Chabiotech Co Ltd, Woori Financial, LG Electronics, Lotte Shopping, Samsung Electro-Mechanics, SM Entertainment, Celltrion, KT Corporation, Hyundai Motor Securities, Doosan Bobcat / Doosan Enerbility / Doosan Robotic, KB Financial, Ecopro BM & DB HiTek
And as always, this post is provided for informational purposes only (and to make your life easier…). It does not constitute investment advice and/or a recommendation…
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KEPCO
💻 Korea Electric Power: South Korea's Power Giant Is On Sale (Seeking Alpha) $ 🗃️ December 30, 2024
🇰🇷 KEPCO (NYSE: KEP / KRX: 015760 / FRA: KOP) or Korea Electric Power Corporation - Integrated electric utility company. Generation, transmission & distribution of electricity in Korea where it’s the largest electric utility. 🇼 🏷️
Price/Book (Current): 0.35
Trailing P/E: 3.59 (no forward P/E) / Forward Annual Dividend Yield: N/A (Yahoo! Finance)
Daesang Corp & Daesang Holdings
💻 Korea Small Cap Gem #31: Daesang - A Consistently Profitable F&B Company Run by the Lim Sisters (Douglas Research Insights) $ December 28, 2024
🌐 Daesang Corp (KRX: 001680 / 001685) - Food products, food ingredients, bio ingredients & food distribution. 🇼 🏷️
Price/Book (Current): 0.49
Trailing P/E: 8.24 (no forward P/E) / Forward Annual Dividend Yield: 3.95% (Yahoo! Finance)
🌐 Daesang Holdings (KRX: 084690 / 084695) - Sauces, kimchi, miwon (MSG) etc. food ingredients. 🇼 🏷️
Price/Book (Current): 0.49
Trailing P/E: 14.47 (no forward P/E) / Forward Annual Dividend Yield: 2.92% (Yahoo! Finance)
E-Mart
💻 A Potential JV Between E Mart and Alibaba's Korean Operations Could Value the JV at About $4 Billion (Douglas Research Insights) $ December 26, 2024
🇰🇷 E-Mart (KRX: 139480) - Oldest & largest discount store chain. 🇼 🏷️
Price/Book (Current): 0.17
Trailing P/E: 3.41 (no forward P/E) / Forward Annual Dividend Yield: 3.23% (Yahoo! Finance)
