GS Retail carried out a spin-off last year, but the effect turned out to be minimal. GS P&L, which emerged after carving out the hotel division, saw its corporate value jump, but GS Retail's core convenience store business struggled due to sluggish domestic demand.
The combined market capitalization of GS Retail and GS P&L, 10 months after the partitioning, was tallied below the level before the split.
At the time of the spin-off, GS Retail believed that, because businesses other than its mainstay convenience stores—such as hotels and home shopping—were mixed together, its corporate value was not being properly assessed. It executed the spin-off to strengthen the competitiveness of each business and lift corporate value, but ultimately failed to see the effect.
As of Oct. 17, GS Retail's market capitalization was 1.3837 trillion won. The securities industry had once suggested 2.2507 trillion won as an appropriate market cap for GS Retail after the spin-off, but it falls well short. Even when adding the market cap of GS P&L, which was spun off, the total comes to 2.1710 trillion won, below the pre-split market cap. Before the split, GS Retail's market capitalization was 2.4242 trillion won.
On Dec. 23 last year, GS Retail spun off its hotel division and listed the newly established GS P&L. Although GS P&L's share price has surged 79% just this year, GS Retail has not recovered its pre-split share price throughout the year. Due to GS Retail's weak share price, the combined market capitalization remains at the pre-split level.
Before the split, GS Retail's share price was 23,150 won, but this year it moved sideways in the 13,000-won to 18,000-won range and failed to climb into the 20,000-won range. Compared with the KOSPI index's 56.27% gain from the start of the year, the stock notably underperformed.
The reason GS Retail's enhancement of corporate value did not materialize as expected is interpreted as the impact of sluggish domestic demand, which left this year's convenience store industry underwhelming.
On a consolidation basis, GS Retail's second-quarter revenue rose 1.7% on-year to 2.9806 trillion won, and operating profit increased 1.7% on-year to 84.5 billion won, holding up relatively well. However, operating profit in the convenience store institutional sector fell 9.1% to 59 billion won.
BGF Retail, which operates CU and competes with convenience store GS25, is also struggling due to a slowdown in the convenience store industry. BGF Retail's market capitalization was similarly weak over the same period compared with the KOSPI index. BGF Retail's market cap rose only from 1.7543 trillion won at the start of the year to 1.8165 trillion won.
Investors' attention is turning to other listed companies ahead of spin-offs. In the near term, Samsung Bioepis Holdings, a newly split holding company, is scheduled to go public following Samsung Biologics' spin-off. Samsung Biologics held an extraordinary shareholders meeting on Oct. 17 and approved a spin-off plan to fully separate the biosimilar (copycat biopharmaceutical) business.
After the spin-off, Samsung Biologics will take charge of the contract development and manufacturing organization (CDMO) business division, and Samsung Bioepis, a 100% subsidiary of Samsung Biologics, will be folded into Samsung Bioepis Holdings and launched as a holding company specializing in new drugs.
Samsung Biologics judged that, under a structure where Samsung Bioepis, which engages in the biosimilar (copycat biopharmaceutical) business, sits under Samsung Biologics, which runs the CDMO business, conflicts of interest could arise with clients.
The split ratio between Samsung Biologics and Samsung Bioepis Holdings was calculated at about 0.65 to 0.35. Based on Samsung Biologics' current market cap of 71.8146 trillion won, Samsung Biologics would have a market cap of 52 trillion won and Samsung Bioepis Holdings would have a market cap of 28 trillion won.
From the perspective of Samsung Bioepis Holdings, which will be the newly established entity, there is pressure to achieve a share price increase sufficient to validate this market capitalization.
For now, the securities industry is expressing positive expectations. Wi Hae-ju, a researcher at Korea Investment & Securities, said, "The Korean market assigns a relatively high multiple premium to the pharmaceutical and bio industry, yet the multiple premium for Samsung Biologics is only about 12%," adding, "If the reason is Samsung Bioepis, then after the spin-off Samsung Biologics could receive a multiple of price-earnings ratio (PER) 78 times, a multiple premium of up to 84%."