Samsung Electronics Enters Earnings Growth Phase... Preferred Shares Become More Attractive
[Asia Economy Reporter Song Hwajeong] Expectations for Samsung Electronics' earnings improvement are growing. With the added anticipation of special shareholder returns, there seems to be a particular need to pay attention to preferred shares.
According to Meritz Securities on the 2nd, Samsung Electronics' operating profit for the third quarter of this year is expected to significantly increase to 11.4 trillion KRW, compared to 8.1 trillion KRW in the previous quarter. Kim Sunwoo, a researcher at Meritz Securities, stated, "This strong performance is more influenced by cost efficiency centered on the set business (reduction in sales promotion and advertising expenses) rather than top-line (sales) improvement," adding, "The fourth quarter earnings are also expected to maintain a cost reduction trend, with a solid operating profit of 10.9 trillion KRW."
Looking at operating profit by division, semiconductors are expected to slightly decline from 5.4 trillion KRW in the previous quarter to 5.2 trillion KRW. IT & Mobile (IM) operating profit is expected to significantly increase to 4.5 trillion KRW from 2 trillion KRW in the previous quarter, driving earnings improvement. Researcher Kim said, "Strong smartphone shipments (77 million units) and cost reductions amid the changed sales environment were effective," and analyzed, "Consumer Electronics (CE) will also record 1.3 trillion KRW based on cost reduction, substantially offsetting the poor performance of Display Panels (DP)."
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Expectations for special shareholder returns are also growing due to earnings improvement. Researcher Kim said, "The quarterly dividend in the fourth quarter, which returns remaining resources based on cumulative free cash flow (FCF) from 2018 to 2020, will greatly exceed market expectations," and predicted, "A quarterly dividend of 354 KRW per share and a special dividend of 1,380 KRW per share." He added, "Considering the differentiated shareholder return yield, preferred shares are more attractive compared to common shares."
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