By Kim Jae-won
Staff Reporter
Following the news that Samsung Life plans to list on the main bourse next year, the share price of the insurer has gone through the roof, recently breaching the 1-million-won mark on the over-the-counter market.
The continuing rise has raised expectations that stocks in the nation’s largest life insurer will each cost over 1 million won by the time they are listed on the Korea Exchange next year.
David Rhee, an analyst at Hyundai Securities, calculated the price based on its Price/Book Value Ratio (PBR), which is used to compare a company's book value to its current market price. It is determined by dividing the company’s current share price by its book value per share.
``Samsung reported a net profit of 600 billion won in the first half of the year, and they are expected to reap 800 billion won in the second half, which is expected to boost its total assets to 11.5 trillion won,’’ Rhee said.
``If you multiply the average PBR of the top 30 global insurance companies, which is estimated at between 1.6 to 1.8, with Samsung Life’s total assets, the total amount will be 18.4 to 20.7 trillion won. Then if you split it into 20 million stocks, which Samsung will issue next year, the price per stock will be approximately 920,000 to 1.03 million won.’’
Rhee pointed out another piece of evidence is the response from the market, which he said was ready to accept the range.
``We surveyed 62 institutional investors about the price of Samsung Life stocks. More than 30 said that they would buy if it was between 900,000 to 1 million won.’’
Another analyst, who declined to be identified, echoed the Rhee’s view.
``We can count on Samsung’s market share and ability to create profits. I think it will be trading at around 1.2 million won.’’
However, some analysts were cautious to predict the price of the stocks.
``The over-the-counter market can affect the real price, but this is just a psychological effect. We should wait on the results of the demand forecast, for which the company will survey institutional investors later,’’ said, Park Sun-ho at KB Securities.
In November, Samsung Life said it planned to list its shares on the Seoul bourse next year in a bid to raise working capital.
Samsung Group will pay the debts of Samsung Motors by selling its stocks in the insurance company. It had agreed with creditors that it would pay the debts by listing Samsung Life by the end of 2000.
Samsung Group then provided 3.5 million shares, owned by former Chairman Lee Kun-hee to creditors as collateral. At that time, those shares were estimated at 700,000 won each.
However, the insurance company has yet to be listed, so the creditors filed a lawsuit against Lee and Samsung subsidiaries to pay 4.7 trillion won in 2005. The court ordered Samsung to pay 2.3 trillion won by selling stocks of the insurer. Samsung Group appealed, and the trial is still pending.