Samsung set to conduct stock split

By Kim Yoo-chul

Samsung Electronics appears serious about conducting its first stock split, responding to calls from the government for bourse activation, and to soothe its shareholders.

"We know the stock split would have a positive impact on sentiment," the company’s chief investors relations officer Robert Yi said during a session at the Korea Exchange (KRX).

The firm has not previously talked about such a possibility openly, so it doing so now is seen as a prelude to a firm decision.

Yi made clear that the company is still considering the move, and so didn’t talk about a split ratio or the timing of such a move.

Samsung shares rose to 1.368 million won in the minutes before closing, up about 1.9 percent. About 147.3 million shares, worth about 200 trillion won in market capitalization, have been issued with 51 percent under the control of foreign investors.

Samsung Electronics has been under pressure from regulators and shareholders to split its stock to make it easier to trade and boost returns.

Company officials and analysts say the move is aimed at boosting shareholder-friendly steps amid the ongoing transition of power to the third generation of the founding family.

In November, Samsung said it would buy back 2.2 trillion won worth of its shares.

Samsung also said it plans to raise dividend payouts to investors by between 30 and 50 percent.

A stock split is a corporate action in which a company divides its existing shares into multiple shares. Although the number of shares outstanding increases by a specific multiple, the total market capitalization remains the same.

"A stock split is usually undertaken when the stock price is quite high, making it too pricey for retail investors. Also, the higher number of shares outstanding could result in greater liquidity for the stock. In order to vitalize the nation's stock market, we will actively persuade Samsung to actualize this plan," said KRX Chairman Choi Kyung-soo.

Samsung Group has been under a period for transition of power to Samsung Electronics Vice Chairman Lee Jae-yong and his two sisters from Chairman Lee Kun-hee since last year, when the chairman was hospitalized following a heart attack.

Analysts positively responded to the company’s acceleration of steps to boost shareholder value.

"Our 2.2 million won target for Samsung Electronics stock isn't too far off as Samsung is improving its corporate structure," E-Trade Investment analyst Kim Ji-woong said.

He said the stock will be re-rated thanks to increasing corporate transparency.

On the business front, Samsung Electronics operations are improving and its shares are seen as undervalued, analysts said.

Samsung, which estimated 5.2 trillion won in operating profit during the fourth quarter of last year, hit bottom in that quarter, they said.

"We rate Samsung Electronics to outperform with a target price of 1.7 million won. Earnings will be driven far more by components, where we believe Samsung has a sustainable long-term advantage. We thus feel more confident in the long-term stability and growth of earnings from today's levels," said Mark Newman at Bernstein Research in Hong Kong.