Who Is the Winner of Nakyeon Lee-Themed Stock Namseon Aluminum?..."Institutions and the Chairman"

[Asia Economy Reporter Yoo Hyun-seok] In this general election, Namseon Aluminum was considered one of the top theme stocks. This was thanks to its connection(?) with Lee Nak-yeon, the chairman of the Democratic Party's COVID-19 National Crisis Overcoming Countermeasures Committee and the elected representative of Jongno-gu, Seoul, which was regarded as a big match in the general election. As it was mentioned as a theme stock, trading volume in the stock market nearly tripled compared to the previous year, attracting market attention and boosting the stock price. However, the future outlook of Namseon Aluminum at the end of the general election is not entirely rosy.

◆The institutions and the chairman had plans all along= In the past, Namseon Aluminum was a penny stock. Even in 2018, the stock price sometimes moved below 1,000 won, receiving little special attention in the market. However, the atmosphere changed from December of that year. Rumors of a connection with Chairman Lee (then Prime Minister) surfaced, and Namseon Aluminum's stock price showed an upward trend. The reason was similar to other political theme stocks. It was rumored that Lee Gye-yeon, the younger brother of Chairman Lee, was the CEO of Samhwan Enterprise, part of SM Group, which is affiliated with Namseon Aluminum. As it rose as a theme stock, trading volume also surged. The average daily trading volume, which was 1,031,307 shares in 2017, jumped to 24,445,382 shares as of the 20th of this month.

The link between Chairman Lee and SM Group was severed when Lee resigned as CEO last November. Although the stock price faltered due to this, the life of the theme stock did not end. As Chairman Lee's popularity continued ahead of the general election, Namseon Aluminum's stock price reached 7,980 won intraday on the 6th, rising 147.06% compared to the end of last year.

However, since the 6th, the stock price has continuously declined, falling to 4,695 won on the 21st. This follows the typical pattern of theme stocks where the stock price drops once the issue disappears. In particular, based on last year's performance, Namseon Aluminum's price-to-earnings ratio (PER) was 34 times, and price-to-book ratio (PBR) was 2.74 times, which is high compared to the KOSPI steel and metal sector's last year's PBR of 11.83 times and 0.38 times, respectively.

While the stock price was higher than the market average, it is estimated that institutions made considerable profits. Institutions sold off Namseon Aluminum shares in two major rounds. First, on November 12 last year, institutions sold 322,452 shares. The closing price was 4,955 won. On November 11 last year, the Blue House announced it would not block government officials with political backgrounds from running in the general election, which fueled speculation about then-Prime Minister Lee's candidacy, and Namseon Aluminum hit the upper price limit.

The second was on the 9th of this month. At that time, institutions sold 2,377,644 shares of Namseon Aluminum at once. The closing price was 5,730 won, which translates to approximately 13.6239 billion won. This period coincided with news that Chairman Lee was leading former United Future Party leader Hwang Kyo-ahn in various opinion polls, causing Namseon Aluminum's stock price to rise. This is why it is estimated that institutions made substantial gains.

SM Group Chairman Woo Oh-hyun is the same. SM Group has subsidiaries including Korea Shipping, Korea Marine Transport, Woobang Industry, Samhwan Enterprise, Gyeongnam Enterprise, and Namseon Aluminum. Chairman Woo has been steadily selling Namseon Aluminum shares since last year. As of December 31, 2018, Chairman Woo held 4,880,644 shares of Namseon Aluminum (4.42% stake). However, by last June, he sold a total of 2,500,644 shares in five rounds. The average selling price was 4,219 won, totaling 10.55021 billion won. He sold the shares when the stock price had risen 49.08% compared to 2,830 won on December 27, 2018.

Along with this, Chairman Woo also sold Namseon Aluminum shares during this month's general election. On the 1st, he sold all 2,380,000 shares he held. The amount obtained from the sale was about 11.086 billion won. The selling price was 4,658 won, which is 44.21% higher than last year's closing price of 3,230 won. With this sale, Chairman Woo's stake in Namseon Aluminum became 0%.

SM Group Chairman Woo Oh-hyun also benefited greatly from the theme. SM Group has subsidiaries including Korea Shipping, Korea Marine Transport, Woobang Industry, Samhwan Enterprise, Gyeongnam Enterprise, and Namseon Aluminum. Chairman Woo has been steadily selling Namseon Aluminum shares since last year. As of December 31, 2018, Chairman Woo held 4,880,644 shares of Namseon Aluminum (4.42% stake). However, by last June, he sold a total of 2,500,644 shares in five rounds. The average selling price was 4,219 won, totaling over 10.5 billion won. He sold the shares when the stock price had risen about 50% compared to 2,830 won on December 27, 2018. This sale ultimately reduced Chairman Woo's stake in Namseon Aluminum to 0%.

◆Steady performance but... industry conditions are a problem= Namseon Aluminum is a specialized aluminum company. Its business areas are divided into aluminum, automotive, and other sectors. While its performance has been steady, it has recently been declining. In 2017, sales and operating profit reached 400.6 billion won and 20.7 billion won, respectively, but in 2018, both decreased to 347.8 billion won and 9.4 billion won. Last year, sales were 324.7 billion won, down 6.6% from the previous year, but operating profit increased by 22.8% to 11.5 billion won.

The problem is this year. Due to the impact of COVID-19, a decline in the automotive sector's performance is expected. Namseon Aluminum achieved sales of 136.4 billion won in the automotive sector last year, accounting for 42% of total sales. Among automakers, it is particularly dependent on Korea GM. Sales from Korea GM last year amounted to 113.4 billion won. Korea GM's sales volume in the first quarter of this year decreased by 24.4% compared to the same period last year. Since the impact of COVID-19 is expected to continue into the second quarter, a decrease in automotive sector sales is inevitable.

The aluminum sector is similar. Namseon Aluminum recorded sales of 188.2 billion won in the aluminum sector last year. According to the company's business report, "The domestic aluminum extrusion industry is characterized by a market formed mainly around architectural sash products, making it sensitive to changes in the domestic construction market." In particular, the construction market is expected to shrink this year due to COVID-19 and other factors, so this sector is also expected to be hit. The Korea Construction Policy Institute forecasts that construction investment will decrease by 3% and overseas orders by 21% compared to the previous year. The Korea Construction Policy Institute said, "The increase in economic uncertainty caused by the COVID-19 crisis negatively affects construction investment, which is relatively volatile. While public construction investment is expected to increase to minimize the economic downturn, private investment is expected to decrease."

This content was produced with the assistance of AI translation services.