VIP Asset Management said on the 13th that it would vote against some of the proposals submitted by the Daewon Sanup board to the shareholders meeting, saying they could infringe on the rights of ordinary shareholders. Earlier, Daewon Sanup submitted a proposal to exclude cumulative voting to the shareholders meeting.
VIP Asset Management said it had repeatedly requested private talks with Daewon Sanup while pointing to its low shareholder return rate, but the company refused.
VIP Asset Management noted, "Daewon Sanup is in an extremely undervalued state, with a market cap only 60% of its net cash." Daewon Sanup's net cash is about 410 billion won, 1.7 times its market cap of about 250 billion won based on the closing price on the 12th.
Even though Daewon Sanup's net profit last year was 76.8 billion won, its actual operating value is effectively being assessed as negative.
VIP Asset Management cited an extremely low shareholder return rate as the reason for this entrenched undervaluation. VIP Asset Management said, "Daewon Sanup holds a massive 410 billion won in net cash, yet the payout ratio released at this shareholders meeting was only 7%," adding, "Some see this poor shareholder return policy as being tied to the succession process of third-generation Vice President Heo Sun-ho."
The interpretation is that the company may be keeping its share price low to reduce the burden of inheritance and gift taxes.
Opaque internal transactions were also flagged. Okcheon Industry, in which related parties including Vice President Heo Sun-ho hold more than 66% equity, generated 81% of its 2024 revenue from Daewon Sanup.
In addition, Daejin, in which related parties including Chairman Heo Jae-geon hold more than 85% equity, derived 92.7% of its revenue from transactions with related parties such as Daewon Sanup.
VIP Asset Management said, "This is a structure likely to lead to the profits of a listed company being attributed to the owner family rather than all shareholders," adding, "This is why oversight by an independent board of directors is more important than for any other listed company."
VIP Asset Management is concerned that if this articles amendment passes, the possibility of minority shareholders participating on the board will be fundamentally blocked.
Daewon Sanup's largest shareholders hold 63% equity, so if cumulative voting is restricted, the practical possibility for minority shareholders to appoint directors disappears.
VIP Asset Management noted, "This move runs squarely counter to the broader trend of strengthening minority shareholder rights, such as last year's amendment to the Commercial Act mandating the introduction of cumulative voting for listed companies with total assets of 2 trillion won or more."
Kim Min-guk, CEO of VIP Asset Management, said, "Daewon Sanup maintains a single-digit, low shareholder return rate despite abundant cash and continues transactions with related-party corporations that could raise tunneling concerns," adding, "We are greatly concerned that this articles change is intentionally undermining shareholder trust."
To strengthen the board's independence, VIP Asset Management filed a disclosure urging Daewon Sanup shareholders to exercise dissenting votes on the "articles amendment (Agenda Item No. 2)."
In addition, judging that a cash dividend with only a 7% payout ratio disregards shareholder value, it also expressed opposition to the "approval of financial statements (Agenda Item No. 1)."
It also urged a vote against the "approval of the limit on directors' remuneration (Agenda Item No. 5)," saying it is not reasonable to increase the cap on executive compensation when shareholder value has not improved.
This is the first time since its founding that VIP Asset Management, which pursues friendly activism, has publicly expressed opposition to shareholders meeting agenda items.
Kim said, "We feel practical limits in the face of the controlling shareholders' overwhelming 63% equity, which approaches the threshold for a special resolution, but we intend to fulfill our responsibility as an institutional investor managing clients' assets."
VIP Asset Management plans to continue monitoring whether Daewon Sanup improves its governance structure and to keep engaging in dialogue even after this shareholders meeting.