Recently, stock prices of holding companies and stocks serving as holding companies have fluctuated sharply. Kolmar Holdings, whose possibility of management disputes has increased, saw a surge in its stock price, while LS, which had fallen due to concerns over duplicate listings, rose after news that Hoban Group acquired its equity.
It is analyzed that the stock prices of holding companies, which have long been undervalued and are smaller in size than their core affiliates, react sensitively to small issues. Experts advise that efforts are needed to raise the values of excessively undervalued holding companies. Strategies such as refraining from subsidiary listings and expanding dividends are deemed important for shareholder return.
◇ Holding company market capitalization is at about 20% of affiliates... Value drops due to 'double counting'
Kolmar Holdings, the holding company of Kolmar Korea, saw its price rise to the upper limit on the 17th and continued to rise for two consecutive days. Funds poured in after it was reported that Dalton Investment, an American activist fund holding 5.69% of Kolmar Holdings' equity, changed its investment purpose from 'simple investment' to 'management participation.'
Although Kolmar Holdings is a holding company, its market capitalization is in the 300 billion won range, which is one-fifth of the 1.6 trillion won market capitalization of Kolmar Korea. Kolmar Korea's stock price rose by only 0.76% on the 17th and fell by 1.50% the next day.
Similarly, LS saw its stock price rise on the 13th after news that Hoban Group acquired its equity. On that day, LS's stock price rose by nearly 20%. The industry analysis noted that 'holding companies are in a state of being undervalued to the point where it is said they surge with just a little push.'
The reason domestic holding company stock prices have remained low for a long time is due to the issue of 'double counting' (double calculation of corporate value). Because subsidiaries under holding companies are also listed on the stock market, the stock prices of holding companies are thus diminished.
The market capitalizations of major domestic holding companies such as LG (10.8 trillion won), SK (10 trillion won), and LOTTE Corporation (2.4 trillion won) are often smaller than that of a single core affiliate, such as LG Energy Solution (76 trillion won), SK hynix (147 trillion won), and LOTTE Chemical (3 trillion won).
In the past, corporations have raised significant funds through initial public offerings (IPOs) of subsidiaries and have utilized this for business investments. Kim Jong-young, a Research Institute at IBK Securities, explained that 'since the 2010 financial crisis, there have been many instances of subsidiaries going public under a parent company that is already listed, the establishment of new entities after partitioning promising divisions of existing companies for IPOs, and listed entities undergoing human partitioning and re-listing in the form of 'holding company-business company'.
◇ Duplicate listings that diminish holding company value also threaten management rights
According to IBK Securities, the duplicate listing ratio in the Korean stock market last year was recorded at 18%, much higher than those of Japan (4.38%), Taiwan (3.18%), China (1.98%), and the United States (0.35%). Among the top 15 stocks by market capitalization, excluding preferred stocks, 11 are related to Samsung, Hyundai, SK, LG, Hanwha, and POSCO, accounting for the majority.
In particular, the ratio of duplicate listings in the securities market is increasing, and thus price-to-earnings ratio (PER) and price-to-book ratio (PBR) discounts are expected to widen further. Most of the holding companies' PBRs, including CJ (0.83 times), LS (0.80 times), Samsung C&T (0.68 times), LG (0.42 times), SK (0.37 times), and LOTTE Corporation (0.28 times), are already below 1. Generally, holding companies focus more on expanding the influence of their subsidiaries through governance rather than profit-generating activities, which reduces their investment attractiveness in terms of stock prices.
Repeated duplicate listings that diminish holding company value also threaten management rights. Companies with large market capitalizations require massive funds to acquire management rights, as the corporate value and transaction scale are large. Additionally, with shares dispersed among many investors, it is not easy for a single investor or specific group to simultaneously target management rights.
However, holding companies with small market capitalizations are more exposed to threats to their management rights. From a long-term perspective, the issue of duplicate listings increases the possibility of unstable management situations for holding companies.
◇ Eliminating duplicate listings is essential for 'true' value appreciation... Incentives for holding company ascension must be increased, including shareholder returns
While the issue of duplicate listings, which causes the undervaluation of holding companies as well as the entire domestic stock market, needs to be fundamentally addressed, it is realistically not an easy task. Experts advise that improving factors such as net asset value (NAV), comprising the values of business and unlisted subsidiaries, shareholder returns, and governance can help increase holding company values.
Kim Han, a Research Institute at Hyundai Motor Securities, stated, 'While the equity value of the listed companies held is the biggest component of the holding company's NAV, it is also necessary to closely evaluate unique upward factors of holding companies, such as dividend yields.'