[Click eStock] "Samsung Electronics, Uncertainty Eases After Vice Chairman Lee Jae-yong's Arrest Warrant Rejected"

[Asia Economy Reporter Oh Ju-yeon] KB Securities analyzed on the 9th that the rejection of the arrest warrant for Samsung Electronics Vice Chairman Lee Jae-yong will serve as an opportunity to resolve uncertainties surrounding Samsung affiliates related to the Samsung Group's management rights irregular succession allegations, including Samsung Electronics, Samsung Biologics, and Samsung C&T.

The Seoul Central District Court (Judge Won Jeong-sook, in charge of warrants) dismissed the arrest warrant requested for Samsung Electronics Vice Chairman Lee Jae-yong in connection with the Samsung Group's management rights succession allegations (2015 Samsung C&T merger, Samsung Biologics accounting). Vice Chairman Lee was able to avoid arrest for the first time in 2 years and 4 months since his release on probation after being detained in February 2017 due to the political scandal.

Kim Dong-won, a researcher at KB Securities, predicted, "Although the prosecution is expected to deliberate on whether to re-request the arrest warrant for Vice Chairman Lee, the dismissal of the warrant after a long investigation of 1 year and 8 months is likely to be somewhat burdensome for the prosecution."

There is an analysis that the uncertainty regarding Samsung affiliates has been alleviated by this dismissal decision.

Researcher Kim expects that "Samsung Group will focus on enhancing corporate value while simultaneously establishing institutional measures to reform its governance structure and strengthen management transparency. It is anticipated that the group will focus on mid- to long-term management strategies and actively pursue M&A attempts based on abundant cash reserves."

Expectations for second-half performance are also rising.

Researcher Kim judged, "As of June this year, the demand for Samsung Electronics' business units (semiconductors, displays, home appliances, mobile phones) in the second half is expected to be better than concerns, making the current time suitable to prepare for an upside in third-quarter demand."

He forecasted, "Semiconductor prices in the third quarter are expected to be similar to the previous quarter, contrary to market research firms' decline forecasts, due to increased demand for server DRAM and enterprise SSD. The display (DP) and home appliances (CE) sectors are expected to exceed operating rate expectations in the second half due to increased demand for ultra-large TVs over 65 inches and the launch of new 5G models." Additionally, he noted, "The mobile phone (IM) division is also expected to confirm a shipment bottom in the second quarter," and diagnosed, "The demand rebound in the consumer-focused B2C market (displays, home appliances, mobile phones) is expected to be a factor that expands the visibility of Samsung Electronics' performance improvement in the second half."

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