“Korea: A Goldmine for Value Investors”
Based out of South Korea, Seoul, Korea
Ben Graham Disciples
South Korea is the size of Maine, but has a population of 49 million
Believes there is no threat from North Korea
Attacks from N. Korea have shown no effects
Why Korea?
Korea grew 3.6% last year.
Shift in household asset allocations toward equities
No capital gains tax inKorea
Positive Regulatory Changes
Growing exposure to emerging markets
Shift in household asset allocation- No capital gains tax
Positive regulatory changes
Growing exposure to emerging markets
Korean companies with improved earnings quality- balance sheets have never been this strong
9.7x P/E 1.1x P/B
Undervalued Yields, Earnings yield 4.2% greater than bond yield
More than 100 Net Nets publicly listed- Samsung Climate Control and Pangrim
CJ O Shopping- $1billion market cap
Online and TV shopping
No 1 cable operator in korea with 15.6% market share (70% owner) – subscription and ad revenues
Sold its china joint venture and stock price dropped harshly- thinks it is overdone and market misreading the situation
Growing at 13.6%. Founded in 1994 and went public in 2000. Minimal CAPEX. Favorable channel position. Private brands.
Also owns a cable company. Stock sold off dramatically after they sold their Chinese home shopping business.
CJO Shopping is worth 1,811 billion Won but trades at 1,158 billion Won.
Private brands
Value $1,646 Million, but trading at market cap of $1,054 Million due to market over reaction,
KG Inicis $144 million Market cap
P/E 6x trailing earnings
Payment gate business, mobile payment business
Leading online payment company
It is a leading company in the fast growing online transaction market. Online shopping is increasing at 16.6%. Established in 1998 and public in 2002. Also, has the no. 1 mobile payment called KG Mobilians. The company is worth $227 billion Won and the market cap is $162 billion Won.
Has not been this cheap since its IPO went public in 2002
Acquired by KG Chemical in 2011, renamed in 2012 KG INICIS
Growth rate has been decreasing- thinks it will turn around
Owns 43% of KG Mobilians – mobile payment service provider
Worth $206
Why are margins going down at CJO Shopping? Margins lower but revenue is growing nicely. CJO is increasing direct sourcing.
China is #1 trading partner with Korea
Definitely a bubble in China, expect more of a gradual, soft landing
Long only fund, and Korea just allowed shorting, but you need a license
Look for domestic Korean companies if you are scared of china blow up
Dividends are taxed at the highest tax rate in Korea and a lot of times companies are family owned and so the management does not want to pay out a dividend.
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