By Yoon Ja-young
Staff Reporter
Companies which are heavily owned by foreign investors post strong earnings and have sound finances, indicating that foreign investors favor companies with strong fundamentals, according to the Korea Exchange (KRX) Monday.
After surveying 527 listed firms that closed their books in December, those with a high foreign ownership outperformed companies with low foreign ownership on various indices. The KRX excluded companies being kept under its surveillance from the survey.
The number of firms which are over 40 percent owned by foreign investors totaled 48, marking 9 percent of the total firms surveyed. However, their net profit totaled 22 trillion won, or 56 percent of total profits. They also accounted for 38 percent of the total sales of the surveyed firms, showing that foreigners invest in the cream of the crop on the stock market.
The firms that least attracted foreign investors, with less than 10 percent of foreign ownership, numbered 333 _ 63 percent of the total. Their net profit totaled only 2.4 trillion won, just 6.3 percent of total earnings.
The firms with foreign stakes of more than 40 percent posted an average 9.7 percent in operating profits to sales ratios, far higher the market average of 6.6 percent _ those which were less than 10 percent owned by foreigners posted 3.2 percent.
The foreign favored firms are financially strong in most cases, having a relatively low debt ratio of 60 percent, while ones which were less favored had an average of 113 percent.
``Companies which are heavily owned by foreigners tend to report strong results and they are financially solid too. Fundamentals are the key factor that foreign investors think of first when they choose stocks,¡?¡? a KRX official said.
Halla Climate Control had the highest foreign stake at 84 percent, and recorded 89.5 billion won in net profit on 1.3 trillion won of sales last year. Its debt ratio was 53 percent. POSCO, which is 59 percent owned by foreign investors, posted a 19.4 percent operating profit to sales ratio and a low debt ratio of 21 percent last year.
Among other firms with high foreign ownership is Hyundai Development with a 65 percent aggregate foreign ownership stake. The company, a leading home builder, posted 15.3 percent in operating margins and 82 percent in debt to equity ratio.
Financial firms were excluded from the survey, but banks have also been favorite choices by foreign investors. Most major banks have a majority ownership by foreigners and these investors reaped handsome profits from generous dividends.