Will Stocks of "Land-Rich Gems" With Lots of Valuable Land Take Off?

Land measured using the cost model: Disclosure of officially assessed values in the notes to become mandatory
Taekwang Industrial, Lotte Chilsung Beverage and Seobu T&D among leading asset-rich stocks
Retailers with numerous supermarkets and departm

With disclosure of the officially assessed land prices of companies' land holdings in the notes to financial statements becoming mandatory starting with financial statements for the year ending in December, market attention is turning to undervalued asset-rich companies with low price-to-book ratios (PBRs). The change is expected to unlock value in related stocks by reflecting the officially assessed prices of prime urban sites that have been carried on the books at their original purchase costs for decades.

Last September, financial authorities finalized amendments to Korean International Financial Reporting Standards (K-IFRS) No. 1016, "Property, Plant and Equipment." The key change is the requirement to disclose in the notes the officially assessed land prices of land accounted for under the cost model.

Until now, domestic companies have chosen between the cost model, which records land at its purchase price, and the revaluation model, which reflects market prices annually. Most companies, however, have adopted the cost model. As a result, prime urban sites purchased in the 1970s and 1980s have remained on the books at their acquisition prices from decades ago.

Starting with financial statements for the year ending in December 2026, however, companies applying the cost model to land must also present the latest officially assessed individual land prices in the notes, alongside the carrying amounts, so the two figures can be compared at a glance.

This is expected to help companies enhance their value through asset revaluation. "For companies that recorded land and buildings acquired decades ago at their original cost, their actual PBR based on current market prices must be lower than the PBR calculated using their carrying amounts," said Eom Sujin, an analyst at Hanwha Investment & Securities. "The gap between an asset's current market price and its carrying amount can be viewed as potential upside."

Hanwha Investment & Securities said the changes are likely to benefit companies that own large non-operating buildings and land; companies with numerous, versatile operating assets; and companies whose assets are unlikely to be sold because they are core to their operations, but for which revaluation could serve as a positive catalyst.

The companies expected to benefit most are those holding prime urban sites that are not directly used in their core operations or have strong development and leasing potential.

Taekwang Industrial, which is undervalued with a PBR of around 0.20, is a prime example. The company holds, at their original acquisition costs, a site on Yeonmujang-gil in Seongsu-dong, Seoul; the site of its headquarters in Jangchung-dong, Jung-gu; and the site of a former factory in Guseo-dong, Busan. The actual market value of these assets is estimated to be several times their book value.

Lotte Chilsung Beverage, which owns a logistics warehouse site in Seocho-dong, Seoul, is considered a leading asset-rich company. The site's book value is only several hundred billion won, while its estimated market value is KRW 2 trillion to KRW 4 trillion.

Kyungbang, which owns the Yeongdeungpo Times Square site—acquired as a factory site in the 1930s and later developed into a large-scale mixed-use shopping mall—and Manho Rope & Wire, which owns a former factory site in Geumjeong-gu, Busan, are also among the companies whose underlying asset values are drawing attention.

Major retailers that own their store sites in key commercial districts across the country are also expected to benefit.

Lotte Shopping owns its Myeongdong flagship store and the site of Lotte Hotel in Seoul, as well as numerous sites for its department stores and supermarkets across the country. The book value of its land alone amounts to trillions of won. Emart and Shinsegae also own sites for Emart and Traders stores nationwide, as well as prime department store properties such as their Gangnam and Centum City branches.

These urban department stores and large supermarkets are highly versatile commercial properties, making it relatively easy to unlock their value through asset monetization, such as sale-and-leaseback transactions or contributions to real estate investment trusts (REITs). If disclosures of officially assessed land prices clearly reveal the gap between market prices and book values, the resulting asset momentum is expected to provide strong support for share prices.

"Buildings used as supermarkets or department stores are generally located in urban areas, and with renovations, they can readily be sold to companies in entirely different industries or to nonprofit organizations," Analyst Eom said. "When a company has dozens or hundreds of similar assets and can sell some of them without significantly disrupting its overall business, it can have greater upside potential than other low-PBR asset-rich companies."

Investors should also watch companies that cannot sell all their assets immediately but have development potential at their sites and stand to see a clear increase in net assets if their land is revalued based on officially assessed prices. Ports, terminals, and warehouses owned by logistics companies, as well as golf courses and accommodations owned by leisure companies, are core operating assets tailored to their respective industries, making them unlikely to be sold. However, reflecting their market values to increase net asset value could serve as a positive catalyst for share prices.

Seobu T&D owns the site of Seoul Dragon City next to Yongsan Station, as well as the Seobu Truck Terminal site in Sinjeong-dong, Yangcheon-gu, where development of an advanced logistics and mixed-use complex is underway. "The value of the assets currently held is not fully reflected in the share price," said Choi Yong-hyun, an analyst at KB Securities. "The total value of the company's assets, based on recent market prices, is estimated conservatively at KRW 2.7 trillion, comprising KRW 1.4 trillion for the hotel, KRW 850 billion for the Sinjeong-dong site, and KRW 160 billion for Najin, among others. By contrast, the current market capitalization is only KRW 700 billion, making the company undervalued even after accounting for KRW 1.2 trillion in net debt."

"There are quite a few cases where office buildings acquired decades ago, or operating facilities and sites developed back then, are still recorded at their original book values, even though they are now worth several or even dozens of times more than their acquisition or development costs," Analyst Eom said. "Reflecting market prices through revaluation not only increases net assets and gives investors a reason to expect the share price to rise, but also has the secondary benefit of improving the debt-to-equity ratio."

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