Corporate Governance Forum: "Hyundai Motor Value-Up Grade 'A-'... Neglecting Lax Financial Management"

No Plan to Sell Idle Assets Unrelated to Automotive Mobility
All 4 Trillion Won Must Be Used for Preferred Stock Purchase and Cancellation

The Korea Corporate Governance Forum on the 29th assigned an 'A-' grade to Hyundai Motor Company's recently announced shareholder return plan, pointing out that the loosely managed balance sheet continues to be neglected.

Namwoo Lee, Chairman of the Korea Corporate Governance Forum, stated in a commentary titled "A Slightly Disappointing Hyundai Motor Value-Up Plan A-" that "The reason Hyundai Motor Company does not receive an A+ or A0 grade is because the loosely managed balance sheet has been continuously neglected." He added, "It is very disappointing that there is no plan to sell idle assets unrelated to automotive mobility, such as the Samsung-dong site (assumed total cost including financial expenses exceeding 20 trillion KRW, Hyundai Motor's 55% stake), 5% stake in KT, and 21% stake in Hyundai Construction."

He advised, "If these assets are proactively disposed of, it would secure cash and help reach a price-to-book ratio (PBR) of 1 per share more quickly."

Earlier, Hyundai Motor Company announced its corporate value enhancement plan at the '2024 CEO Investor Day' held in Yeouido, Seoul, on the 28th. According to the plan, Hyundai Motor will repurchase treasury shares worth 4 trillion KRW over the next three years (2025?2027) and pay a minimum annual dividend of 10,000 KRW per share.

The shareholder return plan of Hyundai Motor was positively evaluated. Chairman Lee said, "The plan for 2025-27, which includes a minimum dividend of 10,000 KRW per share, a total shareholder return ratio of over 35%, and an average ROE of 11-12% over three years, is at an expected level (assuming belief in the long-term growth plan presented above)." He pointed out, "A positive factor is that the company announced a total treasury stock repurchase plan of 4 trillion KRW over three years (an average annual reduction of 2% in shares outstanding), and furthermore, the consideration of preferred stock discounts when repurchasing and canceling treasury shares."

Chairman Namwoo Lee also noted, "Hyundai Motor's common stock still has a price-to-book ratio (PBR) of 0.68. The particularly low PBR among valuation indicators is due to excessive equity capital," adding, "This means that active shareholder returns are possible."

He further suggested, "Currently, the total market capitalization of preferred stocks (preferred stock, 2nd preferred, 3rd preferred) is 14 trillion KRW, and considering the discount on preferred stock prices compared to common stock, it is appropriate to use the entire 4 trillion KRW for repurchasing and canceling preferred stocks."

Earlier in February, the forum also pointed out in a commentary that "It is important for Hyundai Motor to cancel all preferred stocks with high capital costs to return value to shareholders and reduce overall capital costs."

Referring to Hyundai Motor's disclosed future investment plans and global sales targets, he said, "Exchange rates are a major variable, and although Hyundai is in a position to chase Tesla and Chinese electric vehicle manufacturers in software-defined vehicles, if sales volume increases by 4% annually along with price hikes, Hyundai Motor can achieve a high single-digit growth rate in earnings per share (EPS)."

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