151 Firms, Including Emart and Lotte Shopping Co., Ltd., Named 'Low-PBR' for First Time; Tag to Appear on MTS Too

[Financial News] The Korea Exchange will for the first time identify 151 listed companies that have been undervalued for an extended period, including Emart and Lotte Shopping Co., Ltd., as “low-PBR companies.” It also plans to add low-PBR labels to securities firms’ mobile trading systems (MTS) and home trading systems (HTS) to encourage improvements in corporate value. 
According to the Korea Exchange on the 1st, the list of low-PBR companies comprises 151 firms in total: 96 listed on the KOSPI market and 55 on the KOSDAQ market. The move follows up on the “Plan to Improve the Fundamentals of the Capital Market,” announced jointly by relevant agencies last March, and is intended to encourage companies that have been undervalued for an extended period to voluntarily enhance their corporate value.
The selection criterion is whether a company’s price-to-book ratio (PBR), by market and industry, falls in the bottom 25% on the KOSPI or the bottom 10% on the KOSDAQ. A company qualifies if it meets this requirement for six consecutive half-year periods or in six of the most recent seven half-year periods. The aim, the exchange explained, is not simply to select companies with a PBR below 1, but to determine whether they have remained undervalued relative to others in the same industry. Industries were divided into 11 categories under the Global Industry Classification Standard (GICS).
When the exchange calculated PBRs on the 22nd of last month, excluding companies facing grounds for delisting and others, 185 companies met the low-PBR criteria. Of those, 34 companies that had disclosed corporate value enhancement plans, including plans to improve their PBR, were excluded from the announcement, bringing the final list to 151.
The list includes major retailers, chemical companies and steelmakers. According to the data, the latest half-year PBRs were 0.15 times for both Emart and Lotte Hi-Mart, 0.17 times for Lotte Shopping Co., Ltd., 0.18 times for Lotte Chemical Corporation and 0.19 times for Hyundai Steel Company. Financial firms on the list included Hanwha Life Insurance at 0.27 times, Hyundai Motor Securities at 0.31 times and DB Securities Co., Ltd. at 0.33 times.
By industry, industrials had the largest number of companies at 32, followed by materials with 29, information technology with 23 and consumer discretionary with 22. On the KOSPI, materials, industrials and consumer discretionary accounted for 63 companies, or 65.6% of those announced. On the KOSDAQ, information technology had the most, with 17 companies.
The median PBR of the 151 companies on the announced list was 0.23 times. There were 51 companies with a PBR below 0.2, about one-third of the total. The PBRs were calculated using average market capitalization over 20 trading days, from September 21 to October 22, rather than share prices on a single day—the 22nd of last month. 
The list will be posted on KIND’s Value-up page through the day before the next announcement, scheduled for May 4 next year. The timing and format for displaying low-PBR tags on securities firms’ MTS and HTS vary by company.
The exchange will provide one-on-one consultations to all companies announced next year to help them analyze the reasons, set targets and develop plans. The Financial Services Commission is also pursuing measures including revisions to the Stewardship Code guidelines to promote shareholder engagement by institutional investors. 


[email protected] Joo Won-gyu Reporter