Shares of KOSPI-listed Chunil Express have surged nearly 1,000% over the past 10 trading days on news that the Seoul Express Bus Terminal will undergo redevelopment. Chunil Express is the No. 2 shareholder with 16% equity in the Seoul Express Bus Terminal.
However, experts advised caution, saying this is a typical theme-stock pattern in which a small-cap with a limited free float spikes in a short period on redevelopment hopes. In fact, Shinsegae, which holds more equity in the Seoul Express Bus Terminal, has not seen a significant rally. Shinsegae Central City holds the largest equity in the Seoul Express Bus Terminal, and its largest shareholder is Shinsegae.
According to the Korea Exchange (KRX) on the 3rd, Chunil Express shares jumped more than eightfold from 37,100 won on the 18th of last month to 307,000 won on the 2nd of this month. The stock rose to as high as 399,000 won on the morning of the day, hitting the upper limit (the top of the daily price band) for nine straight sessions. The stock climbed 975% over the past 10 trading days. Over the same period, market capitalization surged from the 53 billion won range to 570.3 billion won.
The rally in Chunil Express began on the 18th of last month when news of the Seoul Express Bus Terminal redevelopment hit the market. Chunil Express is the No. 2 shareholder with 16.67% equity in the Seoul Express Bus Terminal, following Shinsegae Central City (equity stake 70.49%), an affiliate of Shinsegae Group.
Buying swelled on expectations that the value of the largest shareholder's equity could soar astronomically if the terminal site in Banpo-dong, Seocho-gu, Seoul, is developed. The Seoul Metropolitan Government said it would begin preliminary negotiations with Shinsegae Central, and Seoul Express Bus Terminal regarding a mixed-use development of the Seoul Express Bus Terminal site.
As the stock price spiked in a short period, the Korea Exchange (KRX) designated Chunil Express as an investment warning issue on the 24th of last month and as an investment risk issue on the 1st of last month, and even suspended trading. Nevertheless, despite the exchange's warnings, the sharp rally in these issues has continued on the 3rd.
The fact that No. 2 shareholder Chunil Express rose by a larger margin than the largest shareholder is seen as having a strong thematic character. Shinsegae is a large-cap with a market capitalization in the 2 trillion won range that moves based on earnings and fundamentals. As such, speculative gains from the redevelopment issue are limited.
Shinsegae shares rose 7.4% from the 18th of last month through the previous day as Shinsegae Central, which falls under the real estate and motor vehicle passenger terminal business segment, aligned with improved third-quarter results.
By contrast, Chunil Express, categorized as a small to mid-cap, soared on expectations tied to the redevelopment issue without a clear change in fundamentals. Chunil Express has been a loss-making company, recording operating losses of 5 billion to 10 billion won for five consecutive years from 2020 through last year.
Moreover, Chunil Express has an 85.74% equity stake held by Chief Executive Park Do-hyeon and related parties. With only about 200,000 shares, less than 15% of the total, in the free float, it means the stock can rise sharply if buying concentrates.
Dongyang Express is similar. While Dongyang Express holds only 0.17% equity in the Seoul Express Bus Terminal, it continues to post losses and its free float is also small at about 35%.
Hwang Se-woon, a research fellow at the Korea Capital Market Institute, said, "For theme stocks, characteristics are important, and it is hard to see redevelopment projects as generating long-term growth momentum," and added, "This is a one-off positive, so investors should be careful."