Block Deal Presents Lower Entry Point
The author is an analyst of KB Securities. He can be reached at joonsop.analyst@kbfg.com. -- Ed.
Market conditions changing in favor of Samsung SDS
— We estimate OP to improve 18.2% YoY in 2022, driven by changes in the IT services market.
— Growing demand for environment, health and safety (EHS) systems following the recent implementation of Korea’s Serious Accidents Punishment Act and the expiry of SAP’s ERP should add to next-gen ERP system demand.
— Cloud migration projects at Samsung Electronics and financial companies should drive top-line growth.
— We believe wage hikes for developers will be smoothly passed through to project orders (2021 wage hikes to be passed through to 2022 orders). Thus, earnings should improve, especially as project orders received prior to the wage hikes have ended.
— Amid an industry-wide shortage of developers, especially mid-level software developers, Samsung SDS, which retains such personnel, should see its pricing power strengthen.
Block deal presents lower entry point
— According to the Korea Economic Daily, approximately 3.02mn shares were sold via a block deal on Mar 21. In 2021, Samsung Group family members Lee Boo-jin and Lee Seo-hyun signed a trust agreement to sell the shares (half of 6.04mn shares held) before Apr 25, 2022 (Korea Economic Daily; Oct 10, 2021).
— The shares were sold at KRW127,400-KRW129,500, or at a discount of approximately 7.5%-9.0% to the Mar 21 closing price (Chosun Biz; Mar 22, 2022). Shares in Samsung SDS are currently (as of 14:30 KST) trading at KRW129,500 (at a discount of 7.5% to the Mar 21 closing price).