Listed companies are consecutively moving to reassess their assets. They are focusing on the effect of reflecting their holdings at market values in financial statements to improve their financial structure.
Theoretically, if the value of assets held by a company increases, it should positively affect corporate value and stock prices. However, stock prices primarily do not react significantly when only the numbers in the financial statements change. This implies that the price-supporting effects of asset reassessment are minimal, as some listed companies expect.
According to the Korea Exchange on the 6th, on the 4th of this month, Korea Securities Dealers Automated Quotations-listed company West T&D announced through public disclosure that its key assets, including land and buildings such as the Wonhyo Shopping Center in Yongsan-gu, Seoul and the Seoul Dragon City Hotel, had been reassessed, leading to an increase of 196.9 billion won in assets. The liability ratio improved from 141.38% in the third quarter of last year to 124.12%. Generally, companies conduct asset reassessments every five years; however, West T&D has undergone reassessment for two consecutive years, including last January. During last year's reassessment, it achieved an effect of an asset increase of 176.4 billion won.
Asset reassessment is the process by which a corporation re-evaluates the value of its assets, such as land, to reflect the current fair value rather than the book price in its financial statements. If the asset value exceeds the book value, the difference is added to equity, improving the liability ratio. At the same time, this leads to an increase in the book value per share (BPS), which can lower the price-to-book ratio (PBR) calculated by dividing the stock price by the BPS. This effectively increases the attractiveness of undervalued stocks.
This year, the listed companies that announced asset reassessment results include West T&D, as well as Hotel Shilla, a company listed on the Korea Securities Dealers Automated Quotations, and OliPass and NEPES, which are KOSDAQ-listed companies. Last year, 22 companies carried out asset reassessments and reported results, a 70% increase compared to 13 companies in 2023.
The trend of corporations consecutively moving to reassess their assets is related to a situation in which performance has barely improved due to prolonged economic downturn. Asset reassessment is a way to improve financial structure easily without increasing profits.
After asset reassessment, both OliPass (614% → 182%) and Hotel Shilla (385% → 184%) as well as NEPES (262% → 240%) significantly improved their liability ratios compared to the third quarter of last year. In particular, OliPass increased its capital from 2 billion won to 6.8 billion won, reducing its liability ratio to one-third of its previous level.
However, if corporate value increases after asset reassessment, it also becomes more advantageous in future funding processes such as loans or corporate bond issuance.
Nonetheless, the stock price support effect is limited. After the results announcement, both OliPass and Hotel Shilla saw their stock prices increase by 2.5% and 1.1%, respectively, by the 6th. West T&D only rose by 0.4%, while NEPES actually dropped by nearly 6%.
Experts diagnosed that investor perceptions regarding asset reassessment have changed. When asset reassessment began around the introduction of International Financial Reporting Standards (IFRS) in 2011, investors perceived that companies could recover financial soundness and also had significant growth potential. However, over time, they deemed that there were no effects beyond improving financial structures.
Lee Sang-ho, a researcher at the Capital Market Research Institute, explained, "Through asset reassessment, companies may develop expectations for (stock price increases) as they actively improve their financial structure and work towards resolving uncertainties. However, investors today already know the current fair value of a company's real estate holdings, which leads them to think that asset reassessment has little significance."
Asset reassessment does not affect a corporation's actual revenue or cash flow. Analysis suggests that without additional shareholder return measures such as stock buybacks, the potential for stock price increases remains limited. A securities industry official noted, "Ultimately, to enhance corporate value through asset reassessment, shareholder return capabilities need to be backed by dividends and stock buybacks or cancellations."