Hana Securities assessed on the 14th that due to the amendments to the Commercial Act, there is a high likelihood of increased shareholder returns and earlier succession timing for Kumho Petrochemical. They also raised the target price from 150,000 won to 160,000 won. The last trading price of Kumho Petrochemical was 125,700 won.
Yoon Jae-sung, an analyst at Hana Securities, forecasted that if the amendment to the Commercial Act mandating the retirement of treasury shares passes in the regular National Assembly in September, two positive scenarios are possible.
The first scenario is enhancing shareholder value through the full retirement of treasury shares. The amendment to the Commercial Act proposed on the 9th of this month includes 'the retirement of acquired treasury shares within one year' along with 'retroactive application to held treasury shares.' Currently, the company's held treasury share ratio is 13.4% (3.54 million shares). It is anticipated that the book value per share (BPS) will increase by approximately 15% with full retirement, leading to an expansion of shareholder value.
The second scenario is that the succession of management becomes quicker, and shareholder returns increase. With the revision of the Commercial Act, the opportunity to utilize treasury shares as friendly equity for management defense is eliminated, increasing the pressure for stock price rise. Consequently, the need for management to expand their equity increases, and future burdens such as gift tax could rise, leading to an earlier succession timing.
In particular, the key contents of the amendment to the Commercial Act, such as 'strengthening the 3% rule for electing audit committee members,' 'introducing cumulative voting systems,' and 'expanding directors' duties of loyalty,' suggest that ensuring stable control may become difficult in the current situation where the major shareholder's equity ratio is only 20% when all treasury shares are retired. Ultimately, to build a friendly relationship with minority shareholders and institutional investors, the company may expand its shareholder return policy further.