Truston Criticizes Taekwang Industrial's Value Enhancement Plan as Evasion of Shareholder Returns

"A Copy of the Investment Pledge from Four Years Ago"

Full-Scale Public Campaign Announced

Truston Asset Management (Truston) has officially requested a full reconsideration by the board of directors regarding Taekwang Industrial’s disclosure of its “2026 Value Enhancement Plan,” calling it “an inadequate report that does not even meet the Korea Exchange’s minimum guideline requirements.”

On July 1, a representative from Truston, the second-largest shareholder of Taekwang Industrial, stated, “We plan to send an official public shareholder letter containing specific quantitative targets next week and will begin a full-scale campaign to bring the issue to public attention.”

"Passive Dividend Policy Toward General Shareholders... Extreme Undervaluation Must Be Addressed"

Truston first pointed out Taekwang Industrial’s capital allocation structure. The company said, “The fundamental cause behind the extreme undervaluation, as shown by a price-to-book ratio (PBR) of 0.22 times, lies in the ‘closed capital allocation’ that fails to share listed company profits with minority shareholders.” Truston further argued, “While the total year-end dividend payout last year was 1.5 billion won, only 500 million won (just 0.06% of market capitalization) went to general shareholders after excluding shares held by the controlling family and related parties.”

Truston also stated, “Management has maintained a reserved stance on expanding dividends, citing four consecutive years of operating losses and the need for new business investments,” and emphasized, “Although the company boasts a debt ratio of 13.5% and retained earnings of over 4 trillion won, claiming there is enough capital for aggressive new business investments, they only invoke a ‘deficit environment’ when discussing dividends for general shareholders.”

The company was also critical of Taekwang Industrial’s plan to use 271,769 treasury shares (24.4%) as strategic resources for mergers and acquisitions (M&A). Truston stated, “If treasury shares are to be used as a means of exchange for M&A, the share price must be properly valued in the market,” and added, “Announcing the disposal of treasury shares while acknowledging a PBR of 0.22 times means selling shareholder assets at a steep discount to market value.”

Truston continued, “At a time when immediate treasury share cancellation is necessary, attaching the precondition of ‘2027 annual general meeting approval’ effectively ties up the shares and serves as a post-hoc excuse to avoid cancellation,” and interpreted this move as “an attempt to maintain friendly stakes for the controlling shareholder and to continue evading the obligation of shareholder returns.”

"Repeating Investment Pledges to Avoid Shareholder Return Demands"

Truston also criticized the mid- to long-term targets presented by Taekwang Industrial—such as 5 trillion won in sales by 2030 and an 8% return on equity (ROE)—as nothing more than a repetition of past investment pledges.

Truston stated, “In December 2022, as shareholder return demands intensified, the company announced a plan to invest a total of 12 trillion won over the next ten years. However, to date, there has been almost no actual investment,” and added, “With sales having dropped to 1.8 trillion won, the company is again proclaiming the goal of achieving 5 trillion won in sales without providing specific capital-raising criteria or execution plans.”

Truston emphasized, “The four independent directors on the board should not merely endorse the board’s deliberation and resolution recommendations in a perfunctory manner, as outlined by government guidelines. Instead, in keeping with the intent of the recent Commercial Act amendment, they must fulfill their duty of loyalty to all shareholders.” Truston concluded, “We will send an official public shareholder letter next week containing specific demands to address the governance issues and to secure board independence, as revealed in the decision-making process for this value enhancement plan. We will also launch a full-scale public campaign.”

This content was produced with the assistance of AI translation services.