Samsung – Love your investors

More effort is needed if Samsung wants its multiple to expand.

• Samsung is clearly frustrated that its share price remains flat despite reporting excellent results during 2013.
• Net profit in 2013 is expected to grow around 34% but the share price remains locked around the KRW1.5m level.
• This translates into a 2013 PER of 7.9x which is ridiculously cheap when compared to the global peers against whom Samsung successfully competes.
• However, while Samsung is a global powerhouse when it comes to products it is a young company when it comes to corporate governance and the way that it treats investors.
• Its geographical location is also a factor but I believe that there is lot that Samsung could do to improve its multiple without having to relocate to Silicon Valley.
• The first step has been taken this morning with the first analyst day that Samsung has held for 8 years being held in Seoul.
• Samsung has also raised its dividend in an effort to please investors.
• Unfortunately, while the event is in English, there is no video and the sound quality is so bad as to render the event useless for anyone who is not there.
• This is what Samsung does not seem to understand.
• It is not the Korean analysts and shareholders who are the marginal buyers.
• It’s the US, European and other Asian investors who hold the key to trading at a better multiple and these investors continue to be ignored.
• To have any confidence that the multiple will not continue to languish I need to see the following:
  • Commitment to an annual analyst day in New York or London in English.
  • Better catering for remote participants at analyst events in Korea.
  • Regular engagement with investors throughout the year by executives rather than just IR.
  • Greater transparency and openness when it comes to discussing strategies and financials.
  • A nurturing attitude towards the bears of the company rather than just locking them out.
  • A proper policy with regards to returning excess cash to shareholders.
• Samsung’s analyst day and the increase of its dividend are a start but far more is needed if the Samsung wants to take its proper place in the pantheon of technology greats.