Sungkwang Band Donates Part of Major Shareholder Stake... 'Expecting Performance Improvement This Year'

[Asia Economy Reporter Park Hyungsoo] Amid growing expectations for Sungkwang Bend's improved performance, CEO Ahn Jae-il gifted 3 million shares of the company's stock to his son, Ahn Jung-gyu. This is seen as a signal of undervaluation, as it is the first time in 20 years since CEO Ahn took full control of management in 2003 that he has transferred part of his holdings.

According to the Financial Supervisory Service's electronic disclosure system on the 20th, Ahn Jae-il, CEO of Sungkwang Bend, gifted 3 million shares of the company to his son, Ahn Jung-gyu, on the 5th. Based on the closing price on the gift date of 8,730 KRW, the value amounts to approximately 26.2 billion KRW. After receiving the shares, Mr. Ahn sold 650,000 shares through off-hours trading to pay gift tax. The selling price per share was 8,477 KRW, converting about 5.5 billion KRW into cash.

As Mr. Jung-gyu sold part of his shares, the largest shareholder's stake decreased from 41.08% (11,748,381 shares) to 38.81% (11,098,381 shares). Looking at Sungkwang Bend's share distribution, CEO Ahn holds 16.07% (4,596,315 shares), Ahn Gap-won, CEO Ahn’s father and chairman, holds 10.49% (2,999,844 shares), and Jung-gyu holds 8.22% (2,350,000 shares). The founder Chairman Ahn, CEO Ahn, and Jung-gyu represent three generations holding shares.

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Chairman Ahn founded Sungkwang Bend Industrial Company in 1963, producing steel pipes. By chance, he saw pipe fittings on a discarded ship and judged the business potential to be high, starting to develop related technology. In 1973, he developed an elbow forming method for welded pipe fittings and began full-scale production, entering a growth phase. In 1980, Sungkwang Bend was incorporated and designated as a specialized factory for shipbuilding equipment. It was listed on the KOSDAQ market in 2001. As of the end of 2000, just before listing, Chairman Ahn and CEO Ahn held 35.38% (10.12 million shares) and 32.72% (9,359,220 shares) of Sungkwang Bend shares, respectively.

Having secured shares before the listing, CEO Ahn took full control of management in 2003, and Chairman Ahn contributed 1.43 million shares to establish an in-house employee welfare fund. As Chairman Ahn’s stake decreased, CEO Ahn became the largest shareholder. Since then, Chairman Ahn has also sold some of his shares through off-hours trading. In 2007, following institutional investors’ concerns about the largest shareholder’s high stake, Chairman Ahn sold part of his holdings. The proceeds from the sale were lent to Sungkwang Bend at an interest rate lower than financial institutions’ rates. Sungkwang Bend used the funds to repay bank loans. Since the company’s listing, Chairman Ahn has not gifted shares to CEO Ahn.

The market has responded positively to the first intra-family share gift after listing. In the 10 trading days following the gift on the 5th, Sungkwang Bend’s stock price rose from 8,730 KRW to 9,920 KRW, a 13.6% increase. During this period, institutional investors recorded net purchases of over 600,000 shares, and foreign ownership increased from 4.83% to 5.90%, rising by more than 1 percentage point.

Lee Bong-jin, a researcher at Hanwha Investment & Securities, said, "Since the third quarter of last year, quarterly order amounts have exceeded 50 billion KRW," adding, "due to logistics issues, sales remained in the 30 billion KRW range until the fourth quarter, but are expected to recover to the 40 billion KRW range starting from the first quarter of this year."

He continued, "We expect benefits from the expansion of LNG investments in the U.S.," adding, "Sales to North America are increasing, and since high-margin bicarb materials are used in LNG facilities, this is a positive factor for profitability improvement."

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