Samsung Electronics Announces ₩110 Trillion Shareholder Return, But Market Is Cold. Why?

The main reason for the decline in Samsung Electronics' stock price after the shareholder return announcement is that the size of the return was lower than market expectations. Investors had expected a larger return from Samsung Electronics, in light of SK Hynix's ₩40 trillion shareholder return case, but the announced ₩110 trillion did not meet these expectations. In particular, investors strongly wanted fundamental corporate value enhancement through share buybacks and cancellations rather than dividends.

The market's view on shareholder return methods clearly favored value enhancement through share buybacks and cancellations. Investors wanted a method that would increase per-share value and boost intrinsic corporate value by buying back and canceling shares, rather than paying dividends. However, when Samsung Electronics announced a dividend-centric policy, the market reacted somewhat lukewarmly, with many opinions even suggesting that dividends were unnecessary.

Samsung Electronics' third-quarter dividend has been confirmed at ₩30 trillion and is scheduled to be paid. Meanwhile, the fourth-quarter dividend plan is still undecided and is expected to be announced additionally in January next year. Investors are showing high interest in the fourth-quarter dividend plan and are awaiting future announcements.

The lack of a concrete plan for utilizing free cash flow (FCF) in Samsung Electronics' shareholder return policy announcement also caused market disappointment. Investors expected a clear blueprint for how FCF would be utilized more actively, but the unclear mention of this aspect increased market participants' disappointment. This left questions about the company's future growth and the sustainability of shareholder returns.

Major foreign investment banks expressed short-term disappointment regarding Samsung Electronics' shareholder return policy. JPMorgan assessed the announcement as a 'short-term disappointment factor,' and Morgan Stanley also mentioned that it slightly fell short of expectations. These assessments from global investment banks are consistent with the overall negative market reaction.

Samsung Electronics stated that it has secured the basis to continuously pay a quarterly dividend of ₩30 trillion. However, despite this sustainable dividend policy, the disappointment at not fully meeting investors' expectations is analyzed as a natural reaction. Investors are demanding not only dividend sustainability but also more active return methods that can increase shareholder value.

Samsung Electronics' announced ₩110 trillion shareholder return policy is considered a record-high. If profit growth continues, there is a prospect that shareholder returns of around ₩200 trillion could be expected in the future. An analysis suggests that if an annual dividend of ₩120 trillion is paid, the dividend yield would reach approximately 8%, which is competitive even when compared to financial stocks. This could serve as a positive signal in the long term.

KB Securities issued a 'strong buy' opinion when Samsung Electronics' stock price was below ₩220,000 on August 10. At the time, the report highlighted Samsung Electronics' undervalued appeal, deeming it a buying opportunity. Even at the current stock price level, it is still assessed as a valid buying zone, with analysis indicating that its investment appeal remains strong from a long-term perspective.

Samsung Electronics' stock price uncertainty and investors' disappointment stem from the absence of clear visibility for next year, unlike SK Hynix. Investors are expecting a concrete roadmap for future performance and shareholder return plans. It is anticipated that once the uncertainty is resolved in January next year, a clear entry point can be identified, and there is still hope that positive news may emerge through the end of September or additional board meetings.

Analyzing Samsung Electronics' technical chart, a rebound formed from late July after a downward trend in July. The current stock price is moving within a specific range, and whether it breaks the upward trendline is considered a critical point. As Samsung Electronics' stock price acts as a barometer for the overall KOSPI trend, its movements significantly impact the entire market.

Samsung Electronics' stock price is highly likely to find strong downside support at the ₩220,000 level. This price point corresponds to the lower end of the 'envelope' box and is expected to act as a defense against further price declines. If index diffusion occurs, attention to various sectors such as cosmetics, finance, insurance, and secondary batteries may be necessary. From a trading perspective, buying opportunities at low prices may be valid in the current range.

Considering the speed of SK Hynix's share buybacks, Samsung Electronics' share buybacks are also expected to be completed within approximately two months. It is highly likely that the buybacks will conclude around mid-October. Samsung Electronics is also conducting share buybacks for incentive payments, and these buybacks themselves are significant in that they can serve as a support line, securing downside rigidity for the stock price.

Currently, ₩220,000 is deemed a clear support line for Samsung Electronics' stock price. However, the supply wall from investors who bought at past highs could act as upper resistance, limiting stock price increases. The price is bound to repeatedly encounter the segment with the highest supply. Therefore, a strategy of confirming whether the previous high is broken after the breakeven selling pressure is absorbed is necessary.

Currently, Samsung Electronics lacks any obligation or concrete plan for share cancellations. While the purpose of share buybacks may include cancellation, whether it will actually be put into practice remains uncertain. There is a great deal of disappointment among investors due to the absence of specific details regarding the method of share cancellation or preparation for it. This could be a significant turning point in future shareholder return policies.

A scenario where Samsung C&T acquires Samsung Electronics shares held by Samsung Life Insurance is expected to emerge soon. This is analyzed as a strategy to restructure the governance centered on Samsung C&T and thereby realize share cancellations. Samsung C&T is expected to devise plans to secure acquisition funds, such as selling affiliate stakes or utilizing cash. Various fundraising methods are being discussed, including the sale of Epis Holdings shares or redistribution of dividends.

Samsung C&T is indicated to potentially secure over ₩20 trillion in assets. The value of Epis Holdings shares through the Samsung BioLogics spin-off is approximately ₩4 trillion, and the value of Samsung Life Insurance shares could be acquired for around ₩11 to ₩12 trillion. Furthermore, considering cash and cash equivalents of approximately ₩8 trillion based on the semi-annual report, it is expected that a significant amount of assets can be secured through various fundraising methods. These funds are likely to be used for acquiring Samsung Electronics shares, among other things.

Nvidia's earnings announcement is expected to be positive. However, at the Jackson Hole meeting, Kevin Warsh is not expected to make any strong remarks. This is interpreted as an intention to minimize market uncertainty and maintain a cautious stance. Investors are paying attention to Nvidia's earnings as well as the tone of the remarks at the Jackson Hole meeting.

The U.S. Treasury Department is pursuing a policy that aims to lower long-term Treasury bond yields. This can positively impact the market, aligning with former President Trump's stock market boost and interest rate cut expectations. Lower long-term Treasury yields could reduce corporate borrowing costs, potentially leading to increased investment. This analysis is also corroborated by data from independent research firm Aris.