[Click eStock] "Activist Funds to Target Companies with Declining Shareholder Return Rates"

IBK Securities Presents List of Potential Activist Fund Targets
"Focus on Companies with Declining Shareholder Return Rates"
...Humedix, POSCO International, and More

Since the shareholder activism initiated by activist fund Align Partners, Coway's stock price has been on an upward trend. Securities analysts have suggested that companies with stable profit structures that experience a significant decline in shareholder return rates are highly likely to face public campaigns by activist funds in the future.

On the 22nd, Kwon Soon-ho, a researcher at IBK Investment & Securities, stated, "Following Align's public campaign, similar demands may arise for companies meeting conditions similar to Coway's."

Earlier, on the 6th, Coway announced that it would increase its total shareholder return rate from 20% of consolidated net income to 40% through cash dividends and full cancellation of treasury shares. However, Align Partners judged this as an 'insufficient measure.' On the 16th, Align Partners sent a public shareholder letter to Coway demanding capital structure efficiency and enhancement of board independence. At that time, Lee Chang-hwan, CEO of Align Partners, pointed out, "The core reason for Coway's undervaluation is the sharp reduction in shareholder returns immediately after Netmarble's acquisition of shares." Align Partners holds a 2.843% stake in Coway.

Researcher Kwon said, "The key issue confirmed in the Coway case is the sharp decline in shareholder return rates following changes in governance and the resulting deterioration in valuation metrics such as the price-to-book ratio (PBR)." He added, "When MBK was the largest shareholder, Coway's average shareholder return rate was about 91%, but after Netmarble became the largest shareholder in 2020, it dropped to around 20%. Align identified this as the cause of Coway's undervaluation (PBR around 1.5 times) and demanded further strengthening of shareholder returns."

Companies likely to be targets of activist campaigns in the future include Coway, Humedix, POSCO International, PharmaResearch, Dongjin Semichem, and Dongwon F&B. The criteria for these companies are ▲market capitalization of over 300 billion KRW ▲profit stability (ROE of 5% or higher from 2019 to 2023) ▲low shareholder return rate (below 30% in 2023) ▲a decreasing trend in shareholder return rates from 2015 to the present.

Researcher Kwon emphasized, "Attention should be paid to companies showing a declining trend in shareholder return rates similar to Coway." He added, "If a company maintains a consistently stable return on equity (ROE) but experiences a decline in shareholder return rates, it could become a target for future demands to strengthen shareholder returns."

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