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VALUEVEST MANAGEMENT'S
MARK BAKAR AND JOHN BURBANK
(continued from preceding
page)
KW650,000 figure was just over 1 times premiums?
Burbank: That's right.
OlD: At 1 times premiums, wouldn't Samsung Life's shares be worth about KW609,000 each and Shinsegae's itself worth around KW148,000 per share - or roughly 12-1/2 times its current price!?
Burbank: I think your math is correct. And we've used very conservative figures for Shinsegae's other assets, too. For example, we just assume Samsung Electronics is worth its current price - which is around KW35,100 per share - despite the fact that it's very depressed.
OlD: What makes you think it's depressed?
Burbank: Among other things the fact that it was selling for as much as KW130,000 in 1995.
OlD: If I'm reading this chart correctly, it looks like it got all the way up to KW173,000, but who's counting?
Burbank: It's down a lot. And, again, the won was nearly twice as high relative to the U.S. dollar at that time. Therefore, in U.S. dollars, Samsung Electronics was selling at four or five times today's price. So Shinsegae's stake in Samsung Electronics lone was, in effect, selling for more than its entire market cap today. Obviously, that's crazy. But that's what it is.
And, then, included among its real estate is the Chosun Westin - which is one of the better hotels in Seoul with a great downtown location. It's a pretty large hotel - with 480 rooms. We've stayed there. It was Korea's first five-star hotel. And it's in a prime, prime location - what's been called the best spot in Seoul.
Again, we carry it at book value - which is only about KW9,400 per share. It's clearly worth much more.
Bakar: In less stressful times, it was probably worth in the neighborhood of KW25,000 per share - all by itself.
Burbank: And, again, we're incorporating no value to Shinsegae's retail segment for its growth, market position or anything else. But someone might view those elements as being very valuable indeed.
OlD: I'm running out of fingers and toes. But I gather it could be worth a lot more than today's price?
Burbank: You've got it.
Bakar: Again, it may be selling at l0¢ on the $1 - or even less.
BUT WE'RE HOPING THAT IT'S NOT ACCURATE.
OlD: And, yet, you guys aren't backing up the truck.
Burbank: We've recently started to put our toe back into the water. However, the insurance industry in general in Korea is not very well understood - probably because only non-life insurers are public. For example, we heard that Shinsegae wanted to sell its stake in Samsung Life and use the resulting cash to expand its retailing segment.
Page 9 of 14
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