Due to Triple Favorable Factors
Although Samsung Electronics has decided not to become a holding company, its stock prices hit another record high with triple factors – higher earnings, plan to cancel the company's treasury shares and higher quarterly dividends. As its shares rose to 2.2 million won (US$1,940) in morning trade on the Seoul stock market for the first time, the company’s market capitalization surpassed 300 trillion won (US$264.55 billion). Samsung Electronics is expected to continuously see its performance improve in the second quarter and its bullish run is likely to continue due to the company’s triple shareholder return policies, including dividend, treasury stock cancellation and repurchase, are also expected to increase its share prices.
Samsung Electronics closed at 2.19 million won (US$1,933) per share on the stock market on April 27, up 2.43 percent from previous trading day. The company hit a new record high for three days in a row. Its share hit an all-time high of 2.23 million won (US$1,963) during the trading session on the same day. When Samsung Electronics said it will not adopt a holding company structure, its stock prices fell below 2.1 million won (US$1,858) in early trading. However, its stock prices bounced back after the company announced that it posted higher sales and profits in the first quarter and is planning to cancel its treasury stocks. On the other hand, other Samsung Group shares, including Samsung C&T, Samsung SDS and Samsung SDI, which showed an upswing in stock prices with its earlier plan to adopt a holding company structure, dropped.
The rally in Samsung Electronics’ shares on the same day was largely due to the company’s announcement to cancel more than 40 trillion won (US$35.34 billion) of shares held in its treasury. An official from Samsung Electronics said, “Considering our current stable financial conditions with the increase in cash holdings, we have decided to cancel our treasury shares as part of plans to boost our shareholder value.”
Currently, Samsung Electronics holds 17,981,686 of common shares and 3,229,693 of preferred shares (in treasury shareholding, accounting for 13.3 percent of the total issued stocks. Due to the large scale, the company plans to cancel the existing shares in two stages. The first stage will cancel 50 percent of the holding, or 8.99 million common shares and 1.61 million preferred shares, by May 2 and the remainder will be canceled after the board’s approval in 2018. Separately, Samsung Electronics also plans to repurchase and cancel its treasury stocks worth 9.3 trillion won (US$8.22 billion) by the end of this year. The company repurchased and cancelled 2.45 trillion won (US$2.16 billion) worth of 1.02 million common shares and 255,000 preferred shares (US$2.16 billion) on the 12th as the first stage. It will also repurchase and cancel 900,000 common shares and 225,000 preferred shares from the 28th as the second stage.
In addition, Samsung Electronics announced its first quarter dividend on the same day. The company has decided to provide 7,000 won (US$6) per share of common shares and preferred shares. It also confirmed its business performance in the first quarter. Samsung Electronics said that it posted nearly 10 trillion won (US$8.83 billion) in operating profit. It was the second-highest figure ever posted by Samsung on a quarterly basis. In particular, the company’s total profits improved as its semiconductor business unit turned a profit of more than 6 trillion won (US$5.3 billion) for the first time.
Samsung Electronics’’ performance and shareholder return policies also raised its target stock prices. Daishin Securities said in its report last month that Samsung Electronics’ target stock prices for residual income models (RIMs) in the long-term point of view are 3 million won (US$2,654), while Korea Investment & Securities presented the figure at 2.85 million won (US$2,522) and Meritz Securities at 2.75 million won (US$2,433).