Truston Asset Management, the second-largest shareholder of Taekwang Industry, has sent an open letter to the company's management and independent board, demanding a comprehensive review of its value enhancement plan. The firm is urging an increase in the dividend payout ratio to 40% by 2030 and a stock split of at least 5-for-1. Truston also indicated that it would consider convening an extraordinary general meeting and legal action if its demands are not met.
On July 14, Truston Asset Management announced that it had sent the open letter requesting a review of the "2026 Value Enhancement Plan" to Taekwang's management and independent board. The firm has requested written responses within 30 days and plans to determine its next steps based on the replies received.
Truston Asset Management first questioned whether the independent board's oversight function had been effectively exercised. It publicly requested clarification on whether the independent board had raised any objections or made adjustments during the drafting process of the value enhancement plan disclosed on June 30, and whether there had been sufficient discussions regarding the management's "debt-free management principle" from a financial leverage perspective.
"The role of the independent board should not merely be to approve management's proposals," Truston stated, adding that the board must provide written proof that the oversight and monitoring promised during the June 18 board meeting were actually implemented.
The firm also directly challenged the dividend policy. Truston argued that the undervaluation of Taekwang Industry is not due to market conditions or profitability, but rather a long-standing low shareholder return policy. It noted that Taekwang's return on equity (ROE) stands at 2.1%, higher than the industry average of 1.8%, yet even during its most profitable year in 2021, the price-to-book ratio (PBR) did not exceed 0.5.
Furthermore, Truston pointed out that the average dividend payout ratio of the three listed companies in the Taekwang Group over the past decade is only 1.3%, while the payout ratio for unlisted affiliates owned by the controlling family is as high as 33%, criticizing this as a "double standard." The firm is demanding a roadmap to gradually increase the dividend payout ratio from 10% this year to the KOSPI average of 40% by 2030.
Truston also urged a stock split of at least 5-for-1 to improve liquidity. It highlighted that the actual number of circulating shares of Taekwang Industry is about 230,000, which is only 1% of the KOSPI average, and the average daily trading turnover is below 0.2%, just one-fifth of the KOSPI average of 1.15%. Truston asserted that the company's belief that liquidity issues are unrelated to intrinsic value undermines the purpose of being listed and called for a stock split or bonus shares.
Truston criticized the company's plan to use its treasury shares (24.4%) as funding for mergers and acquisitions (M&A). It argued that utilizing treasury shares in a situation where the PBR is at 0.22 dilutes the value of existing shareholders' stakes.
In particular, Truston pointed out that the company has invested a total of 301.2 billion won in real estate-related projects over the past two years, including the purchase of the Dosan Park building (20 billion won), the headquarters of Heungkuk Life Insurance (51.2 billion won), and the Courtyard Marriott Namdaemun (50 billion won), as well as a loan to a real estate development company owned by the major shareholder's children (180 billion won). Truston criticized the decision to use 250 billion won worth of treasury shares for M&A instead of returning value to shareholders as contradictory.
Truston Asset Management stated, "We will decide on our next steps after reviewing the responses from management and the independent board. If the issues are not resolved, we will consider all possible options, including convening an extraordinary general meeting and legal review regarding the fulfillment of directors' duties."
* This article has been translated by AI.
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