"Concerns About MBK Related to Korea Zinc Are Valid"...Singapore Global Independent Research

Poor Investment, Profitability Deterioration, and Treasury Stock Exchange, etc.

Global independent research platform headquartered in Singapore, 'Smartkarma,' analyzed MBK Partners' concerns about Korea Zinc as legitimate.

[Image source=Yonhap News]

On the 22nd, according to private equity (PEF) firm MBK Partners, Smartkarma released a research note titled "Four Major Concerns of MBK Partners Regarding Korea Zinc's Management" the day before, stating, "MBK Partners' three concerns about Korea Zinc's poor investments, deteriorating profitability, and increased circulating shares due to third-party allotment rights offering and treasury stock exchange are deemed legitimate."

Smartkarma said, "Poor investments by Korea Zinc over the past few years are among the most pressing concerns for the company," and added, "MBK Partners' concerns are particularly important because the Won Asia Partners investment deals do not make financial sense."

Regarding Korea Zinc's declining profitability, Smartkarma compared the EBITDA margins over the past five years with smelters in India and China, noting, "While competitors have maintained relatively stable conditions, Korea Zinc has shown a gradual decline in recent years under the leadership of Chairman Choi Yoon-beom." It further stated, "Korea Zinc is originally a company that consistently generates operating margins, operating cash flow, and free cash flow," and pointed out, "Such Korea Zinc should have reduced its circulating shares over the past five years rather than increased them."

It also revealed that Korea Zinc's debt increased 35-fold to 1.3 trillion KRW in the first half of this year compared to 2019, and net cash decreased from 2.6 trillion KRW to 800 billion KRW during the same period. Although the balance sheet remains stable, it added that while equity capital increased by 43%, total debt surged by 255% over the same period.

Regarding the possibility of a counter-tender offer by Chairman Choi Yoon-beom's side, Smartkarma said, "Even considering that other large PE firms or conglomerates might assist Chairman Choi, 2 trillion KRW is not a small amount, so raising funds is an issue," and noted difficulties such as insufficient time.

Founded in September 2014, Smartkarma covers major countries including the United States, China, Japan, India, and Korea, providing independent research data analyzing over 5,800 companies. It covers detailed stock analysis, sectors, macroeconomics, and quant. It has received investments from U.S. venture capital firm Sequoia Capital and formed a partnership with Korea's FnGuide in 2021.

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