Hyundai Mobis to Sell Lamp Business... "Potential Unintended Shareholder Returns"

[Financial News] Korea Investment & Securities maintained its "Buy" rating and target price of 700,000 won for Hyundai Mobis on the first, saying the sale of its lamp business could expand shareholder returns.
Hyundai Mobis announced the previous day that it had held an extraordinary board meeting and approved a proposal to spin off its lamp business into a separate company. The company plans to sell a 100% stake in the newly separated entity to French company OPmobility.
Chang Ho Kim, an analyst at Korea Investment & Securities, noted, "Shareholders who oppose the spin-off can exercise their appraisal rights at 408,394 won per share." He added, "The company disclosed that it could withdraw the spin-off if total claims exceed 230 billion won, but we believe the possibility of a withdrawal is low."
He continued, "Under the amended Commercial Act, treasury shares acquired by a company must generally be canceled within one year unless they serve a management purpose approved by the shareholders' meeting. As a result, treasury shares acquired through appraisal rights will ultimately be canceled, producing the same effect as shareholder returns." He added, "Even taking into account the possibility of treasury share cancellation, the stock price is likely to remain above the minimum appraisal-rights price of 408,394 won in the short term."
The impact of the lamp business's disposal on operating profit is expected to be minimal, at around 1%. In the previous year, the lamp division generated 1.022 trillion won in revenue and had equity of 376 billion won, with profitability estimated at approximately 2% to 3%.
Kim added, "Retirement compensation for employees leaving as part of the personnel transfer, along with valuation gains and losses on assets slated for sale, will be reflected in fourth-quarter operating profit and loss." He continued, "The sale price of 600 billion won represents a price-to-book ratio (PBR) of 1.6 times and a price-to-earnings ratio (PER) of 25 times. Since a low-growth business is being sold for more than its book value, there is no disadvantage for existing shareholders."

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