The inclusion of companies in the 'low PBR list' varies significantly by sector, even when the price-to-book ratio (PBR) is the same. This is due to differences in assets, profitability, and future value across industries. Both the steel and finance sectors are categorized as low PBR industries, but the threshold for the bottom 25% is much higher in finance. Thus, the fortunes of companies will likely diverge based on their relative standing within their respective sectors.
According to data from the Korea Exchange's listing disclosure system KIND, calculated in June, the bottom 25% PBR thresholds for various sectors were approximately 0.26 for materials and 0.42 for finance. The thresholds for industrial goods, consumer staples, and consumer discretionary were 0.35, 0.36, and 0.28, respectively.
In contrast, the technology sector had a higher threshold of 0.57, followed by communication services at 0.50 and healthcare at 0.46. The energy, utilities, and real estate sectors were around 0.23. This indicates that the bottom thresholds for technology and materials sectors differ by more than double. However, these preliminary figures based on June data may differ from the actual counts by the Korea Exchange.
The government aims to address chronic undervaluation in the domestic stock market through the announcement of low PBR companies. However, it has applied a relative evaluation method by sector, considering the different asset compositions and business structures. Generally, a PBR below 1 indicates that the market values the company less than its net assets. Nonetheless, evaluations can vary based on sector-specific factors such as asset quality, profitability, and market conditions.
In the materials sector, major corporations exhibited notably low PBRs. Hyundai Steel recorded a PBR of 0.19, Lotte Chemical at 0.20, and Taekwang Industrial at 0.16. Youngpoong (0.18), DL (0.23), and KG Steel (0.24) also fell into the lower tier. Conversely, Posco Holdings (0.42) and LG Chem (0.62) had PBRs below 1 but exceeded the bottom 25% threshold for their sector.
In consumer staples, E-Mart had a low PBR of 0.17, while Samyang Holdings was at 0.20, Samyang at 0.27, and Nongshim Holdings at 0.28. In finance, Hanwha Life (0.21), Hanwha General Insurance (0.29), and Hyundai Motor Securities (0.31) were among the lower performers. Industrial Bank of Korea and Daishin Securities both stood at 0.42, near the threshold.
In the industrial sector, Lotte Holdings had a PBR of 0.28, HDC at 0.32, and CJ Logistics at 0.35. Samsung C&T traded at a discounted price of 0.73 compared to its net assets, but this was still above the lower tier threshold. In communication services, SBS had a PBR of 0.22, LG HelloVision at 0.28, and SkyLife at 0.37. Netmarble was at 0.50, close to the threshold.
In the KOSDAQ market, the bottom 10% threshold is used. Calculated similarly, the thresholds were 0.26 for materials, 0.30 for industrial goods, 0.25 for consumer discretionary, and 0.32 for consumer staples. Finance was at 0.37, technology at 0.35, communication services at 0.31, and healthcare at 0.46.
While the thresholds for the materials sector were similar across both markets, there was a significant difference in technology, with the KOSDAQ at 0.35 compared to 0.57 in the main market. The healthcare sector maintained a consistent threshold of 0.46 in both markets. Thus, the lower tier thresholds vary based on the composition of listed companies and PBR distribution in each market.
However, these companies will not be publicly disclosed on November 2. Initially, the evaluation will consider the bottom tier status over the past six half-year periods, and the first announcement will exclude companies with a PBR exceeding the sector-specific thresholds as of October 22. Improvement plans will also be a factor. A stock exchange official stated, "Among the companies that submitted plans, some do not meet the low PBR criteria, and we are currently finalizing the verification process for low PBR companies by calculating market capitalization and total capital."
* This article has been translated by AI.
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