DS Securities analyzed that on the 17th, CJ Olive Young is more likely to merge with CJ rather than go public (IPO), concluding that CJ's stock is significantly undervalued.
Kim Soo-hyun, head of the research center at DS Investment Securities, noted that "the final changes in equity structure due to CJ Olive Young's share repurchase are related to changes in CJ Group's upper governance structure," and added, "Considering the complexities of the process and tax issues, the possibility for a comprehensive stock exchange with CJ, which the market expects, is viewed more favorably than Olive Young's IPO."
Kim said, "The proper value of CJ Olive Young is expected to be evaluated at least over 6 trillion to 7 trillion won," adding, "Considering the possibility of a structure as a holding company or a 100% subsidiary rather than duplicate listings, CJ's current stock is significantly undervalued."
Previously, CJ Olive Young was reported to have transferred 250 billion won of its capital reserve to retained earnings. The articles of incorporation have added operations of logistics centers and related services, transportation and transport-related services, among others. Furthermore, it has decided to purchase an office building in Yongsan worth 680 billion won.
He explained that "the increase in retained earnings is linked to dividends and the limits on share buybacks, and if all treasury shares are burned, the value of shares held by CJ Olive Young's shareholders will increase," adding that "the addition of business contents will lead to the enhancement of CJ Olive Young's revenue value through potential business expansion, such as the full-scale entry into overseas markets, and the purchase of an office building will lead to an increase in asset value through a future asset revaluation process."
CJ Olive Young is known to be purchasing 11.3% of its shares from Korea Beauty Pioneer (Shinhan SPC). CJ Olive Young has the right to purchase shares held by the special purpose corporation (SPC) within three years. Kim noted, "The external shareholders will fully exit, comprising 51.3% CJ, 25.5% related parties, and 22.6% treasury shares."