Daehan Flour Stock Surges on Governance Fund Interest
By Yoon Ja-young
Staff Reporter
The Korea Corporate Governance Fund, better known as the Jang Ha-sung fund, said it holds more than a 5 percent stake in Daehan Flour Mills, sending share prices of the flour company, which was set up in 1952, to the daily ceiling at one point in the morning session Friday.
The stock eventually lost most of its earlier gains and closed at 214,000 won Friday, gaining 5.42 percent, or 11,000 won.
The fund set up by the Korea University Business School dean Jang reported to the Financial Supervisory Service Friday that it holds around 86,000 shares, or 5.09 percent stake, in the mill company. It has been buying up the shares from October. Those who hold a 5 percent stake or over in a firm are required to report it to the financial regulator, disclosing the source of funding and the purpose of shareholding, such as to participate in management.
The fund said it acquired the stake to improve corporate governance structure, setting up an independent board of executives and auditor.
``We determined that Daehan Flour Mills management isn't working for the interest of the company and the whole shareholders. It has cash-like assets and investment assets that surpass its market cap, but these assets aren't used effectively for the future of the company and the shareholder value,'' the fund said.
It will seek to select outside directors or auditors at the regular shareholders' meeting, according to the announcement.
The mill company was not one of those spotlighted by investors or analysts. ``The market cap is small. The flour mill industry itself doesn't have much growth potential,'' said Song Kwang-su, an analyst at Meritz Securities.
The investors, however, reacted quickly to the Jang fund issue, pushing up the stock price to the daily ceiling.
The 54-year-old professor has been known as a ``chaebol sniper'' for a decade's dedication to attacking the closed management of Korea's chaebol. Jang has asserted that better corporate governance will raise the corporate value and increase benefits for shareholders. The fund reflects his dream to more aggressively realize the long-harbored plan, not as a minority shareholder but as an institutional investor.
Most of the stocks chosen by the fund, including Daehan Synthetic Fiber, the textile business arm of Taekwang Group, soared to the daily ceiling last year, but it hasn't seen the same highs this year. The shares chosen by the Jang fund are small cap stocks. Large cap stocks picked by mega institutional investors like the Mirae Asset funds led the market this year.
Analysts estimate the fund is likely to succeed in influencing the mill company. The owner family holds a 31.93 percent stake in the firm, and foreign investors have a 15.86 percent stake. It recorded 250 billion won in sales and 29.6 billion won in operating profit last year, with the capital summing up to 460 billion won. Its market cap, however, has been hovering below 400 billion won.