Over the years, each member of the Group has sought to engage privately with Samsung C&T’s Board and management in a constructive manner to address the steep discount to the Company’s Net Asset Value ("NAV"), which has been consistently over 65%. However, suggestions have been disregarded, even in the face of growing shareholder concern with the following:
Since the 2015 completion of the merger between Cheil Industries Inc. and Samsung C&T, the Company's total shareholder return ("TSR") was -23% while the KOSPI Index returned 52.4%.2
Over this same period, Samsung Electronics has delivered a TSR in excess of +290%, while Samsung Biologics returned +445%.3
Samsung C&T’s operating profits grew at a CAGR of 23% between 2018 and 2022, or 13% excluding Samsung Biologics. Operational performance at the Company’s unlisted businesses has improved markedly in 2022 and 2023.
Minority shareholders have not participated in Samsung C&T’s economic success.
Samsung C&T’s dismal share price performance since the merger, coupled with a significant increase in intrinsic value, has resulted in an extraordinarily wide discount to NAV.
As of 6th November 2023, the day prior to CLIM making public its intent to submit proposals at the upcoming AGM, the discount to NAV stood at 67%, meaning that the shares only reflected KRW 33 for every KRW 100 worth of assets.
As shareholders began publicly advocating for positive change at the Company, the discount started to narrow, but as of 26th January 2024, it has consistently been over 65%.
This represents a shareholder value gap of KRW 38 trillion, or US$28 billion.
In early 2023, the Company announced a “new” shareholder return policy for FY 2023-25 that is largely unchanged from the preceding three-year period in terms of its ability to narrow the gap between Samsung C&T's share price and NAV.
The policy remains limited to the redistribution of 60-70% of dividend income from its publicly listed affiliates, primarily dependent on dividends paid by Samsung Electronics, and does not include any cash flow from its business operations.
Since the announcement of this policy, Samsung C&T's share price underperformed by an additional 5.1% relative to the KOSPI Index, while the Company’s discount to NAV widened to 67%.4
This negative market reaction clearly signals the Board has been unable to present a compelling capital allocation framework that investors believe adequately balances investment for future growth with shareholder returns.
Samsung C&T’s Shareholder Return Policy does not deliver value to shareholders or address capital allocation concerns.
In 2023, the Company has also announced plans to invest KRW 3 to 4 trillion into its existing operations and new growth engines during FY 2023-25.
Over this same period, the Company expects to generate Free Cash Flow (“FCF”), including dividend income from affiliates, of KRW 1.6 trillion per annum. This means that capex and growth investments will represent ~60-80% of expected FCF for FY 2023-25 and a staggering ~15-20% of current market cap.
These outsized investment plans in the face of an extraordinarily wide discount and persistent share price underperformance clearly demonstrate that shareholder value is a low priority when it comes to formulating capital allocation decisions.
The Board has consistently failed to present a transparent, shareholder-friendly capital allocation framework that systematically considers the returns on different uses of capital, including growth investments and share repurchases.
The Board has not presented a capital allocation framework that balances shareholder returns with the need to invest for future growth and addresses the wide discount to Samsung C&T's intrinsic value.
The Company’s discount to NAV recently narrowed as shareholders began publicly advocating for positive change at Samsung C&T. This reaction signals that investors are encouraged by the prospect of the Board taking action to increase shareholder returns, improve governance and help unlock the value currently trapped in the Company’s shares.
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Effective Date: January 26, 2024
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