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VALUEVEST MANAGEMENT'S
MARK BAKAR AND JOHN BURBANK
(continued from preceding
page)
Bakar: Quite a bit cheaper. We actually owned Cheil.
Needless to say, we sold it earlier this year after our trip. Since you published that feature, it's down about 50% in the local currency and probably about 80% in U.S. dollars.
OlD: It's too bad we don't have room for this segment - because it was starting to sound interesting...
Bakar: Jean-Marie's methodology and his work were 100% right - absolutely dead on. But asset plays are dangerous when a company has horrible management.
[Editor's note: Jean-Marie and Charles de Vaulx stressed that management had destroyed shareholder value in the past and was likely to continue doing so, but that they were, in effect, holding their noses and buying it based on their assessment of its underlying value.]
SHINSEGAE'S WORTH 6 TIMES TODAY'S PRICE.
OlD: But changing the subject as quickly as possible, you say this one is cheaper still?
Bakar: It is. In fact, it's so undervalued that we find it staggering - truly staggering. It's the ultimate case of the value of the pieces exceeding the price of the whole. This company could very well be selling at 10¢ on the $1.
OlD: So far, so good.
Burbank: Shinsegae Department Stores, like Cheil, is an offshoot of the Samsung group - which is the largest, best managed and least leveraged chaebol in Korea for whatever that might be worth.
Shinsegae was established and is currently being run by one of the children of the Samsung group's Lee family who wanted to form her own chaebol. That's not unusual, incidentally. In fact, it's a dream of many Koreans.
So when Shinsegae was spun off, it got shares of Samsung-affiliated investments - Samsung Electronics, Samsung Heavy Industries and Samsung Life Insurance, among others. And Shinsegae has its own business which, as you might expect, is department stores and other retail activities.
OlD: That was gonna be my first guess.
Burbank: So Shinsegae's part of the Samsung family. Its primary investment is a 14-1/2% stake in Samsung Life - which is the largest Korean life insurer. And its primary business is retailing - including a department store division and a joint venture with Costco.
OlD: Really!?
Burbank: That joint venture isn't that large as yet.
As I recall, there are only two stores in it today. And they're only planning to add about one new store per year.
But they also have discount stores called E Marts whose store count they were planning on growing more rapidly - at least until recently.
Shinsegae owns Korea's third largest department store company. And the second largest went bankrupt recently. Even though its retail division isn't what's most important to us, we've been in its department stores. They're very
Page 6 of 14
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