Samsung Shares Hit Record High
August 18 2016 - 8:40AM
Dow Jones News
SEOUL—After three years of struggle, shares of Samsung
Electronics Co. roared to an all-time closing high on Thursday,
capping a 30% rally this year that underscores the technology
giant's improved fortunes.
Shares of the world's largest maker of smartphones by shipments
jumped 4.7% to finish the day at 1,640,000 Korean won ($1,480) a
share, giving it a market capitalization of 232 trillion won ($210
billion).
That makes Samsung five times as valuable as Japan's Sony Corp.
and puts it within striking distance of Chinese internet giants
Alibaba Group Holding Ltd. and Tencent Holdings Ltd. as Asia's most
valuable technology companies.
It also puts Samsung ahead of Intel Corp., Coca-Cola Co. and
Visa Inc. in market-cap rankings, though its main rival Apple
Inc.'s market cap of $562 billion—the world's largest—remains
nearly three times that of Samsung.
Samsung's surge comes after the Suwon, South Korea-based company
reported its most profitable quarter in two years last month, as
operating profit at its mobile unit jumped 57% in the April-to-June
period from a year earlier.
Samsung's recent surge gives its stock even more sway over South
Korea's stock market, where it is already the biggest component on
the country's market cap-weighted benchmark, the Kospi composite
index.
Samsung accounts for about 21% of the South Korean stock market
by market cap, and is more valuable than the index's eight next
biggest companies combined, a list that includes Hyundai Motor Co.
and SK Hynix Inc., the world's second-largest producer of memory
chips.
Samsung's stock gains, which have boosted the company's value by
44% over the past year, stand in contrast to rival Apple Inc.,
which has fallen 5.8% over the same period amid slumping iPhone
sales.
Samsung's price-to-earnings ratio, a measure of the premium that
investors assign to a company relative to profit expectations, has
nearly caught up with Apple for the first time in about three
years. Samsung shares recently rose to trade above 10 times
earnings for the first time in several years, according to data
from FactSet, while Apple's ratio has gradually fallen to about
12.6 times at the end of July.
Samsung's rise this year into fresh record territory comes as
vindication for long-suffering shareholders of Samsung, which has
traded almost exclusively within a fixed band since the beginning
of 2012, even as Samsung became one of the world's best-known
technology brands, outselling Apple by as much as three smartphones
to one at one point.
But investors remained unimpressed with Samsung's paltry
dividends and unconvinced about the company's ability to sustain
its smartphone lead, as other once-dominant mobile-phone players
like Nokia Corp., Motorola and BlackBerry Ltd. quickly lost their
crowns.
Unlike those companies, Samsung has bounced back after two
difficult years in smartphone wars to reassert itself as the
industry's dominant player. After Samsung's mobile profit margin
were ravaged by competition from low-cost Chinese handset makers,
Samsung has managed to push its profit margin back up to 16%, the
highest level since 2014.
"These guys pulled themselves up from the abyss," said Joe Vari,
a San Francisco-based portfolio manager at Artisan Partners Asset
Management Inc., which manages $95 billion in assets, and has been
betting on Samsung for the past three years.
In an interview, Mr. Vari chalked up the company's improved
fortunes to the company's long-term focus and its improved
shareholder returns.
Samsung's continued investment in semiconductors and display
panels—on the magnitude of almost $20 billion a year—has given it a
technological lead over rivals like Micron Technology Inc. in
memory chips and LG Display Co. in smartphone displays.
That positions Samsung well to ramp up its sales of smartphone
components to handset companies like Apple and rivals in China,
analysts said.
Artisan Partners began buying shares of Samsung in late 2013 and
has steadily boosted its shareholdings in Samsung over the past
three years, Mr. Vari said. Samsung is now the biggest shareholding
in Artisan's $11.1 billion International Value Investor fund,
accounting for 5.2% of the fund at the end of June.
Write to Jonathan Cheng at jonathan.cheng@wsj.com
(END) Dow Jones Newswires
August 18, 2016 08:25 ET (12:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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