Truston Asset Management, which drew attention after appearing as the third-largest shareholder of cosmetics glass container maker SMCG, has recently sharply reduced its equity holdings. It has been only three months since it was listed as a major shareholder at the end of Aug.
In the market, Truston Asset Management is seen as cutting losses after entering at a peak and failing to avoid a share price decline. Truston Asset Management is estimated to have incurred a loss of about 1 billion won in this sale.
Truston Asset Management disclosed after the close on the 5th that it had drastically reduced its equity in SMCG from 5.29% to 2.31%.
Earlier, at the end of Aug., Truston Asset Management emerged as a major shareholder of SMCG. It became the third-largest shareholder after Chief Executive Choi Seung-ho, the largest shareholder (44.82%), and VIP Asset Management (5.30%). At that time, Truston bought about 10.2 million shares (5.29%) at 6,868–6,887 won per share. The purpose was simple investment.
After that disclosure, Truston Asset Management began to reduce its equity. It is interpreted that the selling continued after judging that the point at which it secured more than 5% equity was the peak.
Assuming the holdings as of the initial equity reporting date (Aug. 25) of 9,419,923 shares were purchased at the post-listing average price of 6,324 won, and calculating the subsequent average selling price (4,836 won), buying price (6,331 won), and volumes, Truston Asset Management is estimated to have suffered a loss of about 1 billion won on this investment. The remaining equity is also in a loss range.
Founded in 1998, SMCG focuses on producing high-quality glass container products. It counts global brands such as L'Oreal and Johnson & Johnson, as well as domestic cosmetics companies including Amorepacific, Benow, and Charmzone Cosmetics, as sales destinations.
SMCG shares rose from 3,330 won on the first day of listing and surged 175% to 9,170 won on July 11. But they have since trended downward, giving back most of the gains to 4,310 won the previous day. That is a 53% plunge from the peak. As of 2 p.m. that day, the share price also fell below 4,200 won, remaining weak.
According to FnGuide, SMCG's sales and operating profit this year are estimated at 67.8 billion won and 8.1 billion won, up 24% and 84%, respectively, from a year earlier. Despite the outlook for improved results, institutions and foreigners have maintained net selling over the past three months (Aug. 6–Nov. 5). Analysts say it may be because share prices in "K-beauty"-related sectors have not risen as much as expected, limiting related benefits.
During this period, COSMAX, a global cosmetics original design manufacturer (ODM), and SILICON2, a cosmetics distributor, fell 23% and 18%, respectively.
The company also recently decided to issue exchangeable bonds (EB) to raise operating funds. In Sept., the company decided to issue EBs worth 3.4 billion won for research and development (R&D) and facility investment. It issued 451,983 treasury shares at 7,518 won per share, a price 20% higher than the share price at the time (6,300 won), drawing views that it could be an aggressive funding plan. The EBs were acquired by Timefolio Asset Management and NH Hedge Asset Management, split among multiple funds.
The exchange request period for the EB began on the 30th of last month. Although the current share price is lower than at issuance, an overhang (potential supply) burden could grow if the share price rebounds.
Most individual investors are in the red. According to the NH Investment & Securities Namu app, the proportion of SMCG investors with losses is 98.03%, and the average return is minus (-) 29.86%. Kang Si-on, a researcher at Korea Investment & Securities, said, "If SMCG clients launch new products in the second half or major clients release renewed products, an upward revision to estimates is possible."