Samho: Increasingly Shareholder-Friendly Company with Excess Assets

Albert Yong and Chan Lee presented their in-depth investment thesis on Samho (Korea: 010960) at Asian Investing Summit 2017. They also shared their perspective on the Korean investment opportunity as well as their investment theses on KyungDong City Gas (Korea: 012320) and GS Home (Korea: 028150).

Samho was established in 1976, the company engages in the civil engineering business and constructs expressways, subways, bridges, tunnels, facilities and complexes. The company is expected to generate stable earnings based on its expertise in government projects and backlog of public construction contracts. The company focuses on its construction services and does not engage in any real estate development projects. It has a strong balance sheet with little debt and no exposure to project finance loans. Management has begun to adopt more shareholder-friendly policies in recent years, including buying back shares and increasing dividends. The equity has a sufficient margin of safety as net cash and investments (~135 billion Won) are larger than the recent market cap. The company’s cash holdings “sleep” in a bank account at an interest rate of less than 2%, significantly reducing ROE. Returning cash to shareholders should improve the ROE and dividend yield, resulting in a higher multiple for the business.

About the instructors:

Albert H. Yong is a Managing Partner and the CIO of Petra Capital Management, an investment advisory and portfolio management firm based in Seoul, Korea which focuses on undervalued Korean public companies whose market prices are significantly discounted to intrinsic value. Albert believes that the Korean stock market offers exceptional value investing opportunities because many Korean companies are still cheaply valued compared to their earning power and balance sheet. Albert utilizes a disciplined and patient deep value investing approach to seek superior risk-adjusted returns with limited volatility and bases his investment decisions on detailed, research-based analysis and thorough due diligence. Prior to co-founding Petra, Albert was a Managing Director and the CIO of Pinnacle Investments and a Vice President of Pan Asia Capital where he was in charge of managing the Korean equity portfolio. Albert received his MBA from the UCLA Anderson School of Management and his BS in Electrical Engineering from Seoul National University.

Chan H. Lee is the co-founder and a Managing Partner of Petra Capital Management. Since inception in fall 2009, its Petra Korean Value Equity Strategy has returned 24.4% annualized, net of all fees to investors. Chan is constantly on the lookout for mispricing opportunities and special situations where investors can profit handsomely from a subsequent change of valuation. Chan believes that Korea offers numerous investment opportunities for activist investors. Prior to co-founding Petra, he worked as an investment banker and corporate attorney for more than 10 years in Korea. Chan’s career has focused on the analysis and execution of mergers, acquisitions, joint ventures, restructurings and debt and equity financings across a broad range of industries. Chan received his JD from the UCLA School of Law and his BS in Business Administration from the University of California at Berkeley where he was a member of Beta Gamma Sigma.