My Company's Building Value Went Up... But What About the Stock Price? [Weekend Money]

Asset Values Rise After Years of Stagnation Through Revaluation

18 Stocks Disclosed Asset Revaluation in the First Half of This Year

8 Saw Stock Price Gains, 9 Declined, 1 Remained Unchanged

Amid intensifying inflation and surging real estate prices, asset-rich stocks with low price-to-book ratios (PBR), such as those owning land and buildings, are gaining renewed appeal. While a larger gap between the book value and market price of owned real estate may indicate greater upside potential, experts caution that stock prices could actually decline in some cases, so investors should be careful.

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According to the Hanwha Investment & Securities report, "Landlord Stocks and Holding Stocks: Distinguishing Genuine Asset Revaluations," released on July 4, among the 18 companies that disclosed asset revaluation results in the first half of this year, 8 saw their stock prices rise, 9 experienced declines, and 1 remained unchanged.

Asset revaluations can have diverse effects. Positive effects include an increase in stock price due to the reflection of actual asset value and a reduction in the debt ratio. Negative effects include increased volatility in earnings, a decrease in return on equity (ROE), and a rise in depreciation expenses resulting from an increase in the book value of tangible assets.

Companies whose stock prices rose as a result of these positive effects include Daewon Chemical and Mercury, among a total of eight firms. The book value of Daewon Chemical's land holdings in Osan, Gyeonggi Province, rose from 36.3 billion won to 91 billion won after revaluation. As of the closing price on June 18, the share price surged by 29.98% from the previous day to 3,945 won. Mercury also announced the revaluation of its land in Seo-gu, Incheon, on January 6. The stock closed at 3,370 won, up 9.06% from the previous day. The book value of this land increased from 10 billion won to 68.5 billion won following the revaluation.

The other 10 companies failed to elicit significant market reactions. In some cases, the market was already aware that land or buildings with a high proportion of assets had a market value higher than the acquisition cost, and this was already reflected in the normal share price. Additionally, when asset revaluation disclosures coincided with earnings releases, earnings slowdowns led to declines in share prices.

Um Sujin, a researcher at Hanwha Investment & Securities, said, "For asset revaluation to be a positive factor for stock prices, the purpose must be clear and the benefits must outweigh the drawbacks. For example, this applies when a company needs to upgrade its credit rating to invest in a promising business, or when the revaluation is conducted to support the share price in response to demands from minority shareholder coalitions."

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