‘Honam Semiconductor’ Sends Stock Up Fivefold After 10 Upper-Limit Sessions... What Happened to Kumho Electric? [Why the Market Is Rising]

[Financial News] Kumho Electric, classified as a ‘Honam semiconductor’ theme stock, has seen its share price rise nearly fivefold in just over two months. During that period, it hit the upper limit 10 times, while daily trading value at one point exceeded twice its market capitalization.
Kumho Electric’s main business is lighting, including light-emitting diodes (LEDs). As of now, the company’s disclosures contain no confirmation of any business, orders, or investment plans directly related to the Honam semiconductor cluster. During the stock’s rise, market warnings from the Korea Exchange (KRX) followed one after another. The company also disclosed recent changes in the largest shareholder’s holdings and the exercise of conversion rights on convertible bonds (CBs).
According to the Korea Exchange (KRX) on the 12th, Kumho Electric closed at KRW 12,450 in the previous session on the KOSPI market. Its share price has risen 398% from KRW 2,500 on June 24. Over the same period, its market capitalization increased by approximately KRW 123.1 billion, from KRW 30.94004 billion to KRW 154.08139 billion.
Kumho Electric hit the upper limit for three consecutive trading sessions from June 25 to 29. It also surged 29.96% and 29.94% on July 6 and 8, respectively. In August, it again reached the upper limit for three consecutive sessions from the 11th to the 13th, followed by gains of 29.97% and 29.93% on the 20th and 28th, respectively. Since late June, it has hit the upper limit 10 times.
Trading volume also expanded sharply. On the 28th of last month, trading volume reached 25.74 million shares and trading value totaled KRW 253.2 billion. On the 31st, 27.49 million shares changed hands, sending trading value to KRW 341.4 billion. This meant that shares equivalent to approximately 2.2 times the 12.376016 million shares outstanding changed hands in a single day. Trading value that day exceeded twice the market capitalization of KRW 154.5 billion based on the closing price.
On the 1st, 16.25 million shares worth KRW 220.8 billion were traded. The share price reached an intraday high of KRW 14,350, its highest level of the year.
Market warnings followed the sharp rise in the share price. Kumho Electric was designated an investment warning stock on January 20 and June 30. In August, it was placed under investment caution measures twice following advance notices of an investment warning designation, and was again designated an investment warning stock on the 31st. In particular, the closing price on the 13th was up more than 100% from three trading sessions earlier and more than 60% from five trading sessions earlier.
As share-price volatility increased, the company was also asked to make an inquiry disclosure. The exchange requested an inquiry disclosure on August 13 regarding the unusually sharp market movement, but the company responded the following day, "There are currently no material disclosure matters under the disclosure regulations that are either in progress or finalized."
Concentrated trading through a specific account was also detected. On June 29, a specific account classified as an individual investor made a net purchase of 1,561,474 shares. That represented 2.52% of all shares outstanding at the time. Kumho Electric was designated an investment caution stock because it ranked among the top stocks by trading volume through a single account.
Similar trading appeared on August 21 through a specific account classified as an other corporation. The account bought 263,853 shares and made no sales. The amount represented 2.13% of all shares outstanding.
Kumho Electric recently attracted market attention as a so-called ‘Honam semiconductor’ related stock amid expectations for the development of the semiconductor industry in the Honam region. However, its main businesses listed in its periodic reports are general lighting and LED lighting. On a consolidated basis, revenue in the first half of this year was approximately KRW 18.7 billion, while operating loss was approximately KRW 1 billion. LED lighting and discharge lamps accounted for about 99% of revenue.
After the sharp rise in the share price, changes that could affect supply and demand also followed. On the 1st, a related party of the largest shareholder sold a total of 342,851 shares on the market. As a result, the combined ownership stake of Shinju Holdings and its related parties fell from 32.60% to 29.83%.
CB conversion requests also followed. Kumho Electric disclosed on the 8th that conversion rights had been exercised on CBs totaling KRW 500 million on the 2nd and KRW 400 million on the 7th, for a total of KRW 900 million. The conversion price was KRW 5,986 per share, and a total of 150,350 shares are scheduled to be issued. Kumho Electric’s closing price of KRW 12,450 on the 11th was approximately 2.1 times the conversion price.
Securities industry observers say the stock’s surge should not be assessed solely through the ‘Honam semiconductor’ theme; instead, investors should examine whether an actual change in corporate value is following. One industry official said, "The formation of a theme can itself provide a basis for a rise in the share price, but whether there has been a change in corporate value substantial enough to drive the stock up nearly fivefold in just over two months is a separate question." The official added, "Especially when the company has stated in its inquiry disclosure that there are no separate material disclosure matters, investors should examine the gap between expectations and the actual business if the share price and trading volume have surged."
Another industry official added, "The fact that the largest shareholder’s stake declined during the period of the sharp rise, while CB conversion rights were exercised at a level far above the conversion price, is also something that should be examined from a supply-and-demand perspective." The official continued, "Ultimately, what matters is whether actual earnings and business performance going forward can support the company’s current valuation."
[email protected] Choi Doo-sun Reporter