Samsung Electronics' 110 Trillion Won Shareholder Return Plan Disappoints Market on 'Method, Not Scale'; Stock Falls

Samsung Electronics announced a shareholder return policy of 110 trillion won, the largest ever for a Korean company. This includes a decision for 30 trillion won in cash dividends in the third quarter alone, allocating 15 trillion won for employee compensation, and a plan for treasury stock purchases. This is considered an important announcement that raises investor expectations.

Researcher Myung Min-joon commented on this announcement, stating, "Samsung Electronics' decision to return 110 trillion won to shareholders, the largest ever for a Korean company, involves 30 trillion won in cash dividends in Q3 alone, 15 trillion won for employee compensation, and even treasury stock purchases," explaining the main points of the policy.

The 10% rule of the Financial Industry Structural Improvement Act (Financial Industry Act) is cited as a fundamental reason why Samsung Electronics finds it difficult to buy back large amounts of its own shares. This regulation, related to limiting affiliate equity ratios, would cause the equity ratio of shares held by other affiliates to exceed 10% if Samsung Electronics were to buy back a large volume of its own shares.

Researcher Hwang Yoo-hyun explained, "Because of the affiliate rule, the 10% rule of the Financial Industry Act, if they were to buy back a large amount of treasury stock here, the equity ratio of shares held by other affiliates would exceed 10%." Such excessive treasury stock purchases could lead to block deals or market selling pressure, putting Samsung Electronics in a position where it must be cautious.

Samsung Electronics' announcement of its shareholder return policy led to different interpretations depending on investors' tendencies. For short-term leverage investors who prefer quick trading, it was perceived as a disappointing outcome due to minimal immediate stock price boosting effects. In contrast, for long-term investors, it was evaluated as an appropriate dividend plan, leading to satisfaction.

Researcher Hwang Yoo-hyun explained this, saying, "This seems to be a matter of timescale. For those who want to buy today and sell tomorrow, it's frustrating, but for those who are in for the long term, it could be a very good plan," pointing out that policy satisfaction varied depending on the investment timescale.

Samsung Electronics' shareholder return policy is being compared to SK Hynix's, drawing attention to the possibility of additional policy proposals. SK Hynix announced a 40 trillion won shareholder return and explicitly guaranteed over 50% of free cash flow (FCF) for shareholder returns. In contrast to SK Hynix's clear criteria, Samsung Electronics made no specific mention of FCF.

Researcher Myung Min-joon, referring to the SK Hynix case, said, "As SK Hynix announced a 40 trillion won shareholder return and explicitly guaranteed over 50% of FCF, there is growing attention on the possibility of Samsung proposing additional policies." The market is watching to see if Samsung Electronics will also meet investor expectations through additional shareholder return policies.

Experts analyze that if Samsung Electronics and SK Hynix stock prices fall, they are likely to form a 'lower shadow' and rebound. This is because there is a high probability of buying at lower prices when stock prices drop sharply. In particular, the rise in dividend yields and the effect of SK Hynix's treasury stock buyback are expected to support the stock price floor.

Researcher Hwang Yoo-hyun said, "I think if it falls on Monday, it's very likely to be a lower shadow," predicting that the two companies will clearly act as the market's bottom support.

Market disappointment with Samsung Electronics' shareholder return policy stemmed from the lack of a shock treatment through direct cash injection. Unlike SK Hynix, which aims to directly impact the market through treasury stock purchases, Samsung Electronics' policy was interpreted as a delay in treasury stock purchases mainly due to internal issues, leading to an assessment that it fell short of expectations.

Researcher Hwang Yoo-hyun pointed out, "Literally, that was an internal problem for Samsung. In fact, not buying back treasury shares, even though giving dividends is good, stock price aspects are also important." This difference in approach led to disappointment for short-term investors and stable dividend expectations for long-term investors, showing differences in preference based on investor timescales.

The market strongly prefers treasury stock buybacks and cancellations over simple cash dividends. This is because treasury stock buybacks and cancellations have an immediate stock price boosting effect and contribute to supply and demand stabilization. Considering the stock price trend after cancellation, it can also have a positive impact from a long-term perspective.

Researcher Hwang Yoo-hyun stated, "The biggest disappointment is about the method. It's not like Hynix, which aggressively injects cash to significantly boost the stock price," expressing the market's regret that Samsung Electronics did not engage in aggressive treasury stock purchases like SK Hynix.

An analysis also suggested that Samsung Electronics' shareholder return policy announcement may have already been priced into the stock. It's possible that investors seeking short-term gains sold off shares in anticipation of the board's announcement. In other words, the timing of the announcement and market sentiment might have had a greater impact on the stock price than the announcement content itself.

Researcher Hwang Yoo-hyun commented, "For Samsung, there was already something like, 'The board is meeting today. They'll announce today.' Some parts of the stock price might have already reflected that," explaining that market expectations may have already been priced into the stock before the announcement.

Next week's stock market is expected to see increased volatility due to several variables, including a semiconductor conference and Nvidia's earnings announcement. Interest rate issues and the possibility of central bank intervention will also be key factors influencing market trends. However, experts believe that strong buying interest will likely emerge whenever stock prices decline.

Researcher Hwang Yoo-hyun said, "I consider it a volatility factor, for now. But I don't think it will fall. I think in such a situation, whenever it drops by 2% or 3% during the day, there will be a lot of buying coming in." A forecast also suggested that the Treasury Department's hint of intervention would cap interest rates.

Kakao recently announced a 350 billion won treasury stock buyback, but the market's reaction suggests it falls short of expectations. Compared to previous times when trillion-won shareholder return measures were common, as the market has grown, several hundred billion won in treasury stock buybacks are criticized for failing to meet market expectations.

Researcher Hwang Yoo-hyun remarked, "After seeing 100 trillion won, a few hundred billion won in treasury stock buybacks feels like merely an itch, frankly speaking," emphasizing that the scale of Kakao's announcement was minimal compared to market expectations.

A conflict of opinion arose regarding whether Kakao's management is willing to share a future blueprint with the market. Some point out that management's efforts to share its vision are insufficient, and deep distrust regarding the vision and harsh evaluations from shareholders are growing.

Researcher Hwang Yoo-hyun unequivocally stated about management's will, "I don't think so. They are shareholders. So, absolutely not," criticizing that Kakao's management is not sharing its vision from a shareholder's perspective.

According to technical analysis, Samsung Electronics has recovered to the level of returning 50% of its recent decline. This can be interpreted as an important indicator of a technical rebound. In contrast, SK Hynix is expected to face strong resistance in the 2 million to 2.1 million won range, suggesting it will take time to break through this level.

Researcher Hwang Yoo-hyun explained, "In the case of Samsung, it has returned 50% of its decline," mentioning that the two semiconductor companies are in different technical positions.

Experts prefer the Sopeumjang (materials, parts, and equipment) sector within semiconductors as the top priority. This is because major semiconductor companies like Samsung Electronics and SK Hynix are expected to see lower growth and profit growth rates next year compared to this year. Sopeumjang companies are evaluated as likely to maintain relatively solid performance despite this slowdown in growth.

Researcher Hwang Yoo-hyun stated, "Number one is Sopeumjang. Because now, inevitably, Hynix and Samsung, although they still earn a lot next year, their growth rate and profit growth rate will definitely fall," emphasizing that the Sopeumjang sector is promising.

A major reason for the increased volatility in Kosdaq stocks is attributed to a lack of trading volume. Stocks with low trading volumes can experience larger price fluctuations even with small buying or selling pressure due to thin order books. Furthermore, speculative funds concentrating in Exchange Traded Funds (ETFs) and other instruments have exacerbated the supply and demand vacuum for individual Kosdaq stocks, contributing to increased volatility.

Researcher Hwang Yoo-hyun explained, "It's about supply and demand factors rather than content. The drawback is that there's not much trading volume," analyzing that the lack of trading volume in Kosdaq stocks is the core reason for increased volatility. This phenomenon can carry high risks for investors.

The prevailing analysis is that Samsung Electronics' shareholder return plan is being underestimated by the market compared to SK Hynix's policy. This is due to the perception that SK Hynix proposed a more aggressive and immediate stock price boosting effect through treasury stock buybacks, while Samsung Electronics adopted a relatively passive approach.

Researcher Hwang Yoo-hyun stated, "There are many analyses expressing that Samsung Electronics has fallen behind SK Hynix in almost all shareholder return measures." He conveyed that many market experts also found Samsung Electronics' shareholder return plan disappointing compared to SK Hynix. The current market continues to see institutional selling and a supply-and-demand-driven market dominated by individual investors.

Despite the recent rise in SK Hynix's stock price, a fracture in the synchronization phenomenon has appeared, with governance-related stock SK Square not rising in tandem. This can be interpreted as a signal that the link between SK Hynix and SK Square is weakening. In the past, fluctuations in Hynix's stock price also affected SK Square, but now this synchronization phenomenon regarding equity method and relationship appears to be breaking.

Researcher Hwang Yoo-hyun said, "Hynix went up today, right? But the stock that rose as a leverage play with Hynix, did you see SK Square's stock price? It didn't go up. The link is breaking," pointing out that the stock price correlation between the two companies is weakening.