Young Poong Paper Mfg Co., Ltd. 006740
February 05, 2010 - 4:37am EST by
khs824
2010 2011
Price: 16,100.00 EPS $1,915.00 $0.00
Shares Out. (in M): 2 P/E 8.2x 0.0x
Market Cap (in $M): 29,727 P/FCF 6.8x 0.0x
Net Debt (in $M): -21,447 EBIT 5,912 0
TEV ($): 8,280 TEV/EBIT 1.4x 0.0x

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Description

 I recommend a long position in YoungPoong Paper Manufacturing Co., Ltd. (hereinafter "YPP").  YPP is a misunderstood and underfollowed gem.  The stock has not recovered since last year's sell-off by one of Korea's major mutual funds, an event largely irrelevant to YPP's business model and valuation.  As such, the current market neglect and the Company's solid market position present a very compelling opportunity.

 

THESIS SUMMARY

  • - Strong market leader (~40% market share) with solid business model intact and excelling in trough year
  • - Near-monopoly company producing steadily high margins in a traditionally low-margin and volatile industry
  • - Major institutional sell-off creates extremely low valuation (EBITDA-capex 0.9x ~ 2.2x)
  • - All bad assets write-downs (cause of sell-off) completed
  • - Market bias still recovering from 47% decline sell-off a year ago
  • - Founder ousts son and returns as CEO to instill discipline
  • - Earnings already back to "normal" level

VALUATION (Units: shares, KRW mil)

Basic S/O

2,220,000

Treasury

373,590

Net S/O

1,846,410

Stock Price (won)

16,100

Market Cap

29,727

Net Debt

(21,447)

EV

8,280

 

 

EBITDA-capex

(Unit: KRW mil)

10-yr worst (2008)

3,739

10-yr average

9,370

5-yr average

6,444

FY2009 Estimate

6,611

 

 

EV/(EBITDA-capex)

 

10-yr worst (2008)

2.2x

10-yr average

0.9x

5-yr average

1.3x

FY2009 Estimate

1.3x

 

 

PBR (2009 3Q)

0.34x

 

BRIEF PAPER INDUSTRY OVERVIEW

Paper industry is a prototypical capital-intensive industry that requires much upfront fixed asset investments with high electricity and fuel costs to operate the manufacturing facilities.  On a macro scale, the industry cyclical highly correlates with that of the GDP.  Due to the high shipping costs, the paper industry in Korea is primarily domestically oriented.  Until 1997, over-investment of Korean pulp and paper manufacturing facilities caused a glut within the domestic market - coupled with the Asian financial crisis - forcing many small manufacturers to close or become consolidated.  All but one (Donghae Pulp) pre-existing pulp makers liquidated.  Donghae Pulp went into Chapter 11 from 1998 until it was bought out by Moorim Paper in 2008.  It renamed itself as Moorim P&P (Listed: 009580), operating as the only pulp supplier in the Korean domestic market (20% market share).  As a result, Korean paper makers' cost structures widely fluctuate in accordance with the volatile international pulp market price, making the industry seemingly unattractive.

 

COMPANY OVERVIEW

Founded in July 18, 1970, YPP is a Korea-based company manufacturing paper cardboard products. The Company makes two types of products: 1) paper cores, which are used for films, cotton yarns, fiber drums and papers, and 2) liner boards, which are used for ribbed cardboards and laminating papers.

  

YPP BUSINESS MODEL

As mentioned above, YPP produces two main products, 1) paper cores and 2) liner boards.  YPP commands a dominant market leadership in niche paper core market while remaining as a minor player in the liner board market.

  • 1) Paper Core

A paper core is the solid paper/wooden middle part around which steel, paper, or fabric supplies are wrapped and shipped to their respective uses.  The paper core market is a stable and small niche industry within the turbulent paper industry.  While other paper product types (e.g. printing paper) requires large proportions of pulp for its raw input material, core paper uses less than 10% of the total raw input from pulp.  This advantage safeguards YPP from the unpredictable and volatile production cost fluctuation that hurts other Korean paper manufacturers.  Within the paper core market YPP commands ~40% of total industry revenue of KRW 137 billion (FY2008).  From 2000 to 2008, YPP was the market leader in the Korean paper core industry with 30~41% of total market share.  Unlike those of printing paper and other cardboard paper sectors, the industry landscape of the paper core sector allows YPP to enjoy its stable leadership largely because of:

a) the paper core's small industry size relative to the entire paper industry (average one-seventh of liner board market revenue from 2000 to 2009)

b) scattered revenue sources, where an average buyer of core paper accounts for only KRW 500 million per year

c) most of the buyers retain long-term (10+ years) relationships with their respective paper core suppliers

d) paper core industry in general proves to be a capital-intensive industry, deterring any newcomer from entering the market

From 2003 to 2008, the Company's domestic paper core business grew at an average of 5.6% vs. the market's 0.3% growth.  Moreover, during the 2008 economic crisis the Company grew its market share of the paper core business by 29% vs. the market's 13% growth, increasing its market share from 34.05% to 38.85%.

 

  • 2) Liner Board

YPP is one of the remaining minor players in the oligopolistic liner board market.  The Company has held an average of 4% market share throughout the last ten years.

 

YPP vs. Domestic Market for 1) Paper Core and 2) Liner Board

 

 

Anniversary Year

31

32

33

34

35

36

37

38

39

Year

2000

2001

2002 (6 mo.)

2003

2004

2005

2006

2007

2008

PAPER CORE

 

 

 

 

 

 

 

 

 

 

YPP

 

 

 

 

 

 

 

 

 

 

 

Paper Core Revenue (KRW mil)

53,955

40,296

20,890

40,387

41,186

39,247

38,940

41,169

53,073

 

 

Company Growth Rate (YoY)

 

 

 

 

2%

-5%

-1%

6%

29%

 

 

2003~2008 Growth Rate (CAGR)

 

 

 

 

 

 

 

 

5.6%

 

 

Paper Core Market Share (%)

40.8

40

35

30

31.14

33.25

33.24

34.05

38.85

 

Market

 

 

 

 

 

 

 

 

 

 

 

Implied Paper Core Market Size (KRW mil)

132,243

100,740

59,686

134,623

132,261

118,036

117,148

120,907

136,610

 

 

Market Growth Rate (YoY)

 

 

 

 

-2%

-11%

-1%

3%

13%

 

 

2003~2008 Growth Rate (CAGR)

 

 

 

 

 

 

 

 

0.3%

 

 

 

 

 

 

 

 

 

 

 

 

LINER BOARD

 

 

 

 

 

 

 

 

 

 

YPP

 

 

 

 

 

 

 

 

 

 

 

Liner Board Revenue (KRW mil)

26,527

32,874

16,401

32,462

33,758

31,798

37,538

42,069

47,979

 

 

Company Growth Rate (YoY)

 

 

 

 

4%

-6%

18%

12%

14%

 

 

2003~2008 Growth Rate (CAGR)

 

 

 

 

 

 

 

 

8.1%

 

 

Liner Board Market Share (%)

3

3.13

4.77

4.55

4.49

3.98

4.42

4.54

4.13

 

Market

 

 

 

 

 

 

 

 

 

 

 

Implied Liner Board Market Size (KRW mil)

884,233

1,050,288

343,836

713,451

751,849

798,945

849,276

926,630

1,161,719

 

 

Market Growth Rate (YoY)

 

 

 

 

5%

6%

6%

9%

25%

 

 

2003~2008 Growth Rate (CAGR)

'

 

 

 

 

 

 

 

10.2%

  

<Reasons for precipitous stock decline in February ~ March 2009>

 From February 6, 2009 to March 13, 2009 the stock price tumbled precipitously due to a massive sell-off by one of Korea's major mutual funds, Korea Investment Value Asset Management (K-VALUE).  K-VALUE, proclaimed to be Korea's utmost value-bent mutual fund, have not been able to escape the institutional imperative of short-term NAV fluctuations. 

The reason for the sell-off was due to the unforeseen major earnings revision announcement by YPP.  During the leadership of Lee Taek-Sub ("the son") as CEO from Sep. 2002 ~ Mar. 2009, YPP invested its excess free cash into various overseas assets including Washington Mutual 7.25% perpetuities, Bank Tulanalem 8.5%/15s, Glencore 8%/perp, Kazkommerts Bank, etc.  The invested assets more than halved in value between December 2007 and December 2008.  The founder and former CEO Lee Moo-Jin ("the founder") kicked his son out of the CEO post and returned as CEO as of March 2009.  In the process, YPP conservatively wrote down all of the bad debt/asset losses at the end of FY2008.  No outside investor or K-VALUE had foreseen this event even in 2008 3Q.  As such, K-VALUE and other investors sold off the share in a one-month time horizon driving the price down from KRW 24,150 to KRW 12,750 (47.2% decline).  Currently, the Company has fully written down the losses and now currently only holds Glencore KRW 4 bil (market price).  After much infighting with his father, the son exited his 2.7% position in the open market in August 2009.

With the dominant business model intact and free of all bad asset write-downs, the stock price has not recovered since March, 2009.

  

RISKS

  • 1. Unstable cost structure of Korean paper manufacturers
    • A. As a near-monopoly paper core supplier in Korea, YPP operates in a totally different business than its peer paper makers. As mentioned above, other paper manufacturers' cost fluctuation comes from the volatile international pulp market. However, YPP's paper core uses less than 10% of its raw material from pulp and therefore retains a steady cost structure (See Gross Profit Margin shown in the "Valuations" section).
  • 2. Commodity business lowering the barrier to entry
    • A. Due to the capital intensive nature of the paper business, much upfront fixed asset investments with low margin in a steady and dull industry deters any newcomer.
    • B. As a result, only established family-controlled paper makers remain in business forming an oligopoly
  • 3. Low return on invested capital business
    • A. The recent consolidation in the old paper families controlling large chunks of the market has put an upward pressure to consumer prices.
    • B. In the case of YPP, its average ROIC between 2003~2009 was 16%, the worst year being 7% in 2008 (See below "Valuations" section).
  • 4. Further indiscriminate cash investments
    • A. The main culprit of the indiscriminate cash investments, the son, has been completely ousted from the Company by his father, who returned as Chairman and CEO.

 

MAJOR HOLDINGS (as of September 30, 2009)

Lee Moo-Jin (founder, Chairman, and CEO)                                      51.28%

YPP Treasury                                                                                 16.83%

Jin Heung Mutual Savings Bank (Value player in Korean market)          13.99%

 

VALUATION RECAP (Units: shares, KRW mil)

Basic S/O

2,220,000

Treasury

373,590

Net S/O

1,846,410

Stock Price (won)

16,100

Market Cap

29,727

Net Debt

(21,447)

EV

8,280

 

 

EBITDA-capex

(Unit: KRW mil)

10-yr worst (2008)

3,739

10-yr average

9,370

5-yr average

6,444

FY2009 Estimate

6,611

 

 

EV/(EBITDA-capex)

 

10-yr worst (2008)

2.2x

10-yr average

0.9x

5-yr average

1.3x

FY2009 Estimate

1.3x

 

 

PBR (2009 3Q)

0.34x

 

 

 

Anniversary Year

34

35

36

37

38

39

40

Year

2003

2004

2005

2006

2007

2008

2009

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

76,306

79,667

73,184

78,004

84,840

102,701

85,491

 

 

     Growth

 

4%

-8%

7%

9%

21%

-17%

 

 

     CAGR

 

 

 

 

 

 

2%

 

 

Gross Profit

12,578

11,150

10,820

13,916

12,204

11,462

 

 

 

     Margin

16%

14%

15%

18%

14%

11%

 

 

 

EBIT

7,384

5,420

4,921

8,136

6,099

5,263

5912

 

 

     Margin

10%

7%

7%

10%

7%

5%

7%

 

 

Depreciation & Amortization

3,855

3,235

2,753

2,353

2,165

2,107

2,432

 

 

Capex

1,229

1,958

2,939

707

998

3,631

1,733

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA-Capex

10,010

6,697

4,735

9,782

7,266

3,739

6,611

 

 

(EBITDA-Capex) ROIC

26%

18%

13%

23%

15%

7%

9%

Catalyst

 1. Management Change (founder ousts son and returns as CEO)

  • A. Completion of bad asset write-down and extremely clean balance sheet
  • B. Focus on core business (paper cores)
  • C. Shun from shoddy cash investment practices

2. Sell-off resulting in extremely low valuation

3. Increase in revenue and market share throughout worst year

4. FY2009 bounced back to "normal" levels.

    sort by    

    Description

     I recommend a long position in YoungPoong Paper Manufacturing Co., Ltd. (hereinafter "YPP").  YPP is a misunderstood and underfollowed gem.  The stock has not recovered since last year's sell-off by one of Korea's major mutual funds, an event largely irrelevant to YPP's business model and valuation.  As such, the current market neglect and the Company's solid market position present a very compelling opportunity.

     

    THESIS SUMMARY

    VALUATION (Units: shares, KRW mil)

    Basic S/O

    2,220,000

    Treasury

    373,590

    Net S/O

    1,846,410

    Stock Price (won)

    16,100

    Market Cap

    29,727

    Net Debt

    (21,447)

    EV

    8,280

     

     

    EBITDA-capex

    (Unit: KRW mil)

    10-yr worst (2008)

    3,739

    10-yr average

    9,370

    5-yr average

    6,444

    FY2009 Estimate

    6,611

     

     

    EV/(EBITDA-capex)

     

    10-yr worst (2008)

    2.2x

    10-yr average

    0.9x

    5-yr average

    1.3x

    FY2009 Estimate

    1.3x

     

     

    PBR (2009 3Q)

    0.34x

     

    BRIEF PAPER INDUSTRY OVERVIEW

    Paper industry is a prototypical capital-intensive industry that requires much upfront fixed asset investments with high electricity and fuel costs to operate the manufacturing facilities.  On a macro scale, the industry cyclical highly correlates with that of the GDP.  Due to the high shipping costs, the paper industry in Korea is primarily domestically oriented.  Until 1997, over-investment of Korean pulp and paper manufacturing facilities caused a glut within the domestic market - coupled with the Asian financial crisis - forcing many small manufacturers to close or become consolidated.  All but one (Donghae Pulp) pre-existing pulp makers liquidated.  Donghae Pulp went into Chapter 11 from 1998 until it was bought out by Moorim Paper in 2008.  It renamed itself as Moorim P&P (Listed: 009580), operating as the only pulp supplier in the Korean domestic market (20% market share).  As a result, Korean paper makers' cost structures widely fluctuate in accordance with the volatile international pulp market price, making the industry seemingly unattractive.

     

    COMPANY OVERVIEW

    Founded in July 18, 1970, YPP is a Korea-based company manufacturing paper cardboard products. The Company makes two types of products: 1) paper cores, which are used for films, cotton yarns, fiber drums and papers, and 2) liner boards, which are used for ribbed cardboards and laminating papers.

      

    YPP BUSINESS MODEL

    As mentioned above, YPP produces two main products, 1) paper cores and 2) liner boards.  YPP commands a dominant market leadership in niche paper core market while remaining as a minor player in the liner board market.

    A paper core is the solid paper/wooden middle part around which steel, paper, or fabric supplies are wrapped and shipped to their respective uses.  The paper core market is a stable and small niche industry within the turbulent paper industry.  While other paper product types (e.g. printing paper) requires large proportions of pulp for its raw input material, core paper uses less than 10% of the total raw input from pulp.  This advantage safeguards YPP from the unpredictable and volatile production cost fluctuation that hurts other Korean paper manufacturers.  Within the paper core market YPP commands ~40% of total industry revenue of KRW 137 billion (FY2008).  From 2000 to 2008, YPP was the market leader in the Korean paper core industry with 30~41% of total market share.  Unlike those of printing paper and other cardboard paper sectors, the industry landscape of the paper core sector allows YPP to enjoy its stable leadership largely because of:

    a) the paper core's small industry size relative to the entire paper industry (average one-seventh of liner board market revenue from 2000 to 2009)

    b) scattered revenue sources, where an average buyer of core paper accounts for only KRW 500 million per year

    c) most of the buyers retain long-term (10+ years) relationships with their respective paper core suppliers

    d) paper core industry in general proves to be a capital-intensive industry, deterring any newcomer from entering the market

    From 2003 to 2008, the Company's domestic paper core business grew at an average of 5.6% vs. the market's 0.3% growth.  Moreover, during the 2008 economic crisis the Company grew its market share of the paper core business by 29% vs. the market's 13% growth, increasing its market share from 34.05% to 38.85%.

     

    YPP is one of the remaining minor players in the oligopolistic liner board market.  The Company has held an average of 4% market share throughout the last ten years.

     

    YPP vs. Domestic Market for 1) Paper Core and 2) Liner Board

     

     

    Anniversary Year

    31

    32

    33

    34

    35

    36

    37

    38

    39

    Year

    2000

    2001

    2002 (6 mo.)

    2003

    2004

    2005

    2006

    2007

    2008

    PAPER CORE

     

     

     

     

     

     

     

     

     

     

    YPP

     

     

     

     

     

     

     

     

     

     

     

    Paper Core Revenue (KRW mil)

    53,955

    40,296

    20,890

    40,387

    41,186

    39,247

    38,940

    41,169

    53,073

     

     

    Company Growth Rate (YoY)

     

     

     

     

    2%

    -5%

    -1%

    6%

    29%

     

     

    2003~2008 Growth Rate (CAGR)

     

     

     

     

     

     

     

     

    5.6%

     

     

    Paper Core Market Share (%)

    40.8

    40

    35

    30

    31.14

    33.25

    33.24

    34.05

    38.85

     

    Market

     

     

     

     

     

     

     

     

     

     

     

    Implied Paper Core Market Size (KRW mil)

    132,243

    100,740

    59,686

    134,623

    132,261

    118,036

    117,148

    120,907

    136,610

     

     

    Market Growth Rate (YoY)

     

     

     

     

    -2%

    -11%

    -1%

    3%

    13%

     

     

    2003~2008 Growth Rate (CAGR)

     

     

     

     

     

     

     

     

    0.3%

     

     

     

     

     

     

     

     

     

     

     

     

    LINER BOARD

     

     

     

     

     

     

     

     

     

     

    YPP

     

     

     

     

     

     

     

     

     

     

     

    Liner Board Revenue (KRW mil)

    26,527

    32,874

    16,401

    32,462

    33,758

    31,798

    37,538

    42,069

    47,979

     

     

    Company Growth Rate (YoY)

     

     

     

     

    4%

    -6%

    18%

    12%

    14%

     

     

    2003~2008 Growth Rate (CAGR)

     

     

     

     

     

     

     

     

    8.1%

     

     

    Liner Board Market Share (%)

    3

    3.13

    4.77

    4.55

    4.49

    3.98

    4.42

    4.54

    4.13

     

    Market

     

     

     

     

     

     

     

     

     

     

     

    Implied Liner Board Market Size (KRW mil)

    884,233

    1,050,288

    343,836

    713,451

    751,849

    798,945

    849,276

    926,630

    1,161,719

     

     

    Market Growth Rate (YoY)

     

     

     

     

    5%

    6%

    6%

    9%

    25%

     

     

    2003~2008 Growth Rate (CAGR)

    '

     

     

     

     

     

     

     

    10.2%

      

    <Reasons for precipitous stock decline in February ~ March 2009>

     From February 6, 2009 to March 13, 2009 the stock price tumbled precipitously due to a massive sell-off by one of Korea's major mutual funds, Korea Investment Value Asset Management (K-VALUE).  K-VALUE, proclaimed to be Korea's utmost value-bent mutual fund, have not been able to escape the institutional imperative of short-term NAV fluctuations. 

    The reason for the sell-off was due to the unforeseen major earnings revision announcement by YPP.  During the leadership of Lee Taek-Sub ("the son") as CEO from Sep. 2002 ~ Mar. 2009, YPP invested its excess free cash into various overseas assets including Washington Mutual 7.25% perpetuities, Bank Tulanalem 8.5%/15s, Glencore 8%/perp, Kazkommerts Bank, etc.  The invested assets more than halved in value between December 2007 and December 2008.  The founder and former CEO Lee Moo-Jin ("the founder") kicked his son out of the CEO post and returned as CEO as of March 2009.  In the process, YPP conservatively wrote down all of the bad debt/asset losses at the end of FY2008.  No outside investor or K-VALUE had foreseen this event even in 2008 3Q.  As such, K-VALUE and other investors sold off the share in a one-month time horizon driving the price down from KRW 24,150 to KRW 12,750 (47.2% decline).  Currently, the Company has fully written down the losses and now currently only holds Glencore KRW 4 bil (market price).  After much infighting with his father, the son exited his 2.7% position in the open market in August 2009.

    With the dominant business model intact and free of all bad asset write-downs, the stock price has not recovered since March, 2009.

      

    RISKS

     

    MAJOR HOLDINGS (as of September 30, 2009)

    Lee Moo-Jin (founder, Chairman, and CEO)                                      51.28%

    YPP Treasury                                                                                 16.83%

    Jin Heung Mutual Savings Bank (Value player in Korean market)          13.99%

     

    VALUATION RECAP (Units: shares, KRW mil)

    Basic S/O

    2,220,000

    Treasury

    373,590

    Net S/O

    1,846,410

    Stock Price (won)

    16,100

    Market Cap

    29,727

    Net Debt

    (21,447)

    EV

    8,280

     

     

    EBITDA-capex

    (Unit: KRW mil)

    10-yr worst (2008)

    3,739

    10-yr average

    9,370

    5-yr average

    6,444

    FY2009 Estimate

    6,611

     

     

    EV/(EBITDA-capex)

     

    10-yr worst (2008)

    2.2x

    10-yr average

    0.9x

    5-yr average

    1.3x

    FY2009 Estimate

    1.3x

     

     

    PBR (2009 3Q)

    0.34x

     

     

     

    Anniversary Year

    34

    35

    36

    37

    38

    39

    40

    Year

    2003

    2004

    2005

    2006

    2007

    2008

    2009

     

     

     

     

     

     

     

     

     

     

     

     

    Revenue

    76,306

    79,667

    73,184

    78,004

    84,840

    102,701

    85,491

     

     

         Growth

     

    4%

    -8%

    7%

    9%

    21%

    -17%

     

     

         CAGR

     

     

     

     

     

     

    2%

     

     

    Gross Profit

    12,578

    11,150

    10,820

    13,916

    12,204

    11,462

     

     

     

         Margin

    16%

    14%

    15%

    18%

    14%

    11%

     

     

     

    EBIT

    7,384

    5,420

    4,921

    8,136

    6,099

    5,263

    5912

     

     

         Margin

    10%

    7%

    7%

    10%

    7%

    5%

    7%

     

     

    Depreciation & Amortization

    3,855

    3,235

    2,753

    2,353

    2,165

    2,107

    2,432

     

     

    Capex

    1,229

    1,958

    2,939

    707

    998

    3,631

    1,733

     

     

     

     

     

     

     

     

     

     

     

     

    EBITDA-Capex

    10,010

    6,697

    4,735

    9,782

    7,266

    3,739

    6,611

     

     

    (EBITDA-Capex) ROIC

    26%

    18%

    13%

    23%

    15%

    7%

    9%

    Catalyst

     1. Management Change (founder ousts son and returns as CEO)

    2. Sell-off resulting in extremely low valuation

    3. Increase in revenue and market share throughout worst year

    4. FY2009 bounced back to "normal" levels.

    Messages


    SubjectNet Cash
    Entry02/05/2010 02:18 PM
    Membermiser861

    I haver never seen a korean management team that i feel comfortable valueing cash at 100% of book value.  I highly doubt this team is any better.  Why should we not give the cash a significant discount say at least 50% discount?  Do they have any stated plans for the cash?


    SubjectRE: Net Cash
    Entry02/07/2010 09:42 PM
    Memberkhs824

    Thanks for the question.

    1) Can we take into account the full amount of cash?

    You are right to point out that one can be uncomfortable valuing all available cash and equivalents at BV.  However, the KRW 21 billion I used in the valuation is actually the amount excluding an additional KRW 22.3 billion of cash equivalent and non-operating assets (see following):

    (Unit: KRW million)

    Govt. Treasury 4,068
    Short-Term Loans (interest 10~12%) 12,005
    Long-Term Investments 22
    Subsidiary NAV 6,192
    TOTAL 22,287

    I have excluded all of the above value entirely from the valuation as if all of them are written off as unsalvageable.

    Moreover, the following table shows (1) YPP's annual interest income.  Assuming an aggressive interest rate of 10% on cash deposit (very unlikely), I examined what could be the possible (2)implied "actual" minimum cash at hand.  Comparing (2) and (3), then taking into account smaller amount still provides a significant cash cushion within the Company.

    (Unit: KRW million)

    Anniversary Year 34 35 36 37 38 39 40
    Year 2003 2004 2005 2006 2007 2008 2009 3Q
    (1) Interest Income 1,202 1,217 1,089 2,290 3,236 2,938 2,050
    (2) Implied cash amount assuming 10% interest  12,020 12,170 10,890 22,900 32,360 29,380 27,333
    (3) YPP's Cash & Equivalents Book Value 21,487 25,247 26,935 24,380 26,513 16,576 21,447
    (1)/(3)*100 5.6% 4.8% 4.0% 9.4% 12.2% 17.7% 9.6%

    (2) Why 50% discount cash BV?

    (i.e. Net Cash KRW 21,447 mil --> KRW 10,724 mil)

    This still would make the valuation attractive.

     

     

    EV KRW 19,004 mil
    EV/(EBITDA-capex)  
    10-yr worst (2008) 5.1x
    10-yr average 2.0x
    5-yr average 2.9x
    FY2009 Estimate 2.9x

     

    (3) Any stated plans for the cash?

    No.  Looking at the last ten years' worth of financials, the Company's seems to retain excess amounts of cash at hand.  The Company has always taken an ultraconservative stand on capital expenditure (hard any, with no machinery expansion for the last 10 years) and cash investments.  That tradition had deteriorate during the son's (the former CEO who had just been ousted by his father in March 2009 after incurring significant losses from cash investments) tenure.  Now, the founder and CEO (the father, with 51.28% control of Company) has returned and will bring back discipline to the operations and smart cash deployments.


    Subjectjust want to make sure I'm not missing something
    Entry02/08/2010 08:35 AM
    Memberheffer504

    this is a $14 stock that trades under 1,000 shares a day pretty frequently, that sound right?


    SubjectRE: just want to make sure I'm not missing
    Entry02/08/2010 09:22 AM
    Memberkhs824

    yes.

    the trading volume is pretty thin.

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