[Click eStock] Hanla, the Meaning of 2.6% Treasury Stock Cancellation

[Asia Economy Reporter Hwang Junho] Hanla announced on the 13th that it would repurchase and cancel treasury shares and convertible preferred shares, and use 40% of net income for dividends, raising expectations for shareholder value enhancement.

Hanla disclosed plans to cancel 1,016,000 existing treasury shares, repurchase and cancel 820,000 convertible preferred shares, and repurchase, cancel, and pay dividends with up to 40% of net income.

Meritz Securities analyzed that one of the reasons generally cited as a valuation discount factor for small and medium-sized construction companies is the low dividend payout ratio (only about 10% on average in the industry), and that the long-term repurchase, cancellation, and dividend plan within 40% of annual net income is significant.

In particular, Hanla's 10,170,000 convertible preferred shares (held by Hanla Holdings) were likely to dilute valuation in the long term.

Additionally, Hanla has established a foundation where the simple proposition "if net income increases, shareholder value increases" can actually be applied.

Park Hyung-ryeol, a researcher at Meritz Securities, analyzed, "The number of housing units for sale, which was only 2,895 units in 2019 and 3,452 units in 2020, surged to 8,369 units this year. The subcontracted housing sector, which showed a cost ratio of 86% last year and 84% in the first half of this year, is maintaining high profitability. Also, self-developed projects, which had not been carried out since 2017, are planned for 1,125 units this year and 596 units next year, indicating an expected increase in net income."

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