Investors eye Samsung's cash pile at rare strategy briefing

Tue Nov 5, 2013 4:03pm EST
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By Miyoung Kim

SEOUL (Reuters) - Investors are likely to press Samsung Electronics Co on dividends and plans to sustain growth as the world's biggest smartphone maker holds its first analysts' briefing in eight years on Wednesday.

Record-high profits have left Samsung sitting on a $50 billion cash pile, equivalent to more than a fifth of its market capitalization, but its shares trade at a deep discount to peers largely because of its investor-unfriendly returns.

Samsung's lack of transparency through the years has left shareholders with few expectations that the South Korean company will shed light on its plans. But some analysts and investors say they hope Wednesday's public relations event will prove them wrong.

"There are a few hopes that they will talk about shareholder returns, but expectations are not high here," said Mark Newman, an analyst at sell-side research firm Sanford Bernstein.

"If they make any commitment to increase dividends or re-initiate share buybacks, it would be taken very positively by the market. This would have the greatest impact, but hopes are low."

Samsung trades at seven times projected earnings, while its rival, Apple Inc, trades at a premium of 12. Samsung shares have fallen 2 percent over the past six months, while Apple has gained 17 percent during the same period.

Samsung's profits have risen to record highs in six of the past seven quarters, but its shareholder returns have steadily fallen to the lowest level in at least five years. It gave shareholders just 5.1 percent of its profit last year in dividends compared to a 15.8 percent payout in 2007 when it last bought back shares in the market.

Foreigners own half of the shares of the company, but its shareholder return policy and the fact that it doesn't have shares listed in foreign markets, have contributed to the stock trading at a deep discount.   Continued...

A journalist walks at the Samsung booth during a media preview day at the IFA consumer electronics fair in Berlin, September 5, 2013. REUTERS/Fabrizio Bensch