Major domestic trading corporations (POSCO International, SK Networks, LX International, Samsung C&T's trading division, Hyundai Corporation) are striving to enhance corporate value by announcing shareholder-friendly policies. Trading corporations have low operating profit margins, resulting in a low average price-to-book ratio (PBR). They are seeking a reevaluation by finding new revenue sources and implementing shareholder-friendly policies.
According to industry sources on the 26th, the PBR of domestic trading corporations is 1.18 times for POSCO International (based on recent stock prices as of the 3rd quarter financial statements), 0.44 times for SK Networks, 0.48 times for LX International, 0.61 times for Samsung C&T, and 0.44 times for Hyundai Corporation. PBR is a figure calculated by dividing the corporation's stock price by its book value, indicating that a PBR below 1 means the current stock price is lower than the company's liquidation value.
As criticisms arise regarding the undervaluation of the domestic stock market and the departure of investors, the government is encouraging corporations to participate in value-up programs by referring to the example of Japan. This year, the trading corporations that disclosed value-up related policies include POSCO International and SK Networks. On the 23rd, POSCO International announced the 'Plan to Enhance Shareholder Value Through Corporate Growth,' which includes increasing the shareholder return rate to 50% and introducing interim dividends. The shareholder return rate refers to the proportion of funds used for dividends and share buybacks divided by net income, interpreted as the corporation distributing more of its profits to shareholders as the rate increases.
SK Networks announced on October 31 that through a corporate value enhancement plan, it aims to raise its return on equity (ROE) to above 3.5%, an increase of 1.1 percentage points from the current level by 2026. The plan also includes proposals to pay annual dividends of at least 250 won per share starting next year and to introduce interim dividends.
SK Networks is transforming into an artificial intelligence (AI)-focused business holding company. It has previously received evaluations of not being properly recognized for its corporate value due to low ROE, but it plans to focus on building an AI-centric business model and enhancing profitability. Adjusting its business portfolio, including ending the home appliance business of its subsidiary SK Magic and transferring SK Rent-a-Car, is part of the strategy to increase ROE.
LX Holdings, which includes LX International and LX Pantos, expects performance improvement this year through enhancements in the equity method. The securities industry anticipates that measures will be introduced to enhance corporate value using retained cash.
LX International is increasing its stake in LX Pantos, which it utilizes as a source of dividends. On the 6th, LX International purchased additional shares of LX Pantos (15%), raising its stake to 76%. Based on the previous stake of 51%, LX International earned dividends of 40.9 billion won in 2022 and 44.1 billion won in 2023 from LX Pantos. This year's dividends are expected to increase further.
The trading division of Samsung C&T has been implementing a shareholder return policy every three years. This year marked the first implementation of the third policy. It decided the scale of dividends based on 70% of dividends from affiliated companies, and each year, it plans to retire its own shares.
Market experts believe that the revenue structure of trading corporations is changing and that corporate value will improve as they implement shareholder return policies. The operating profit margin of trading corporations is typically low, usually between 1% and 4%. Profit margins have fluctuated due to changes in international commodity prices and exchange rates. Recently, they are moving away from a trading-centered focus and achieving results in resources and investment businesses.
Park Jong-ryeol, a researcher at Korea Securities, noted, 'If the unstable political situation stabilizes, other trading corporations are expected to unveil value-up policies.'