SAMSUNG:
STOCK MARKET ANALYSIS OF THE SMARTPHONE GIANT
Presents a detailed
analysis of the South Korean giant: the Samsung group. samsung company which
country makes history, the products and the profile of this ultra diversified
multinational. Next, we will discuss the study of Samsung Electronics'
financial reports, its main ratios and its stock market history since 2011.
In
conclusion, we will ask ourselves whether or not it may be wise to invest in
the stock market in Samsung Electronics stock.
ORIGINS OF SAMSUNG: FOUNDER OF THE GROUP AND EVOLUTION OF THE BRAND
Samsung was founded in March 1938 by Lee Byung-chull with less
than $ 30 in their pocket (a few thousand won). At that time, Samsung was
a grocery store and a fish market.
Lee Byung-chull was born in 1910 and died in 1987. He gave the
management of Samsung to his son, Lee Kun-hee, in 1966.
The activity of Samsung knew a strong expansion between its
creation and 1947 but the war of Korea forced the company to close, before
being reopened at the end of the war but in another sector of activity: the
sugar refinery, then textiles and woolen mills.
Since its origins, samsung consumer electronics has focused on
diversification and started its electronics activities from the 1960s through
Samsung Electronics Devices, Samsung Electro-Mechanics, Samsung Coring and
Samsung Semiconductor & Telecommunications. The company began
manufacturing black and white TVs in the 1970s.
Then, between 1972 and the beginning of the 1980s, Samsung
intensified its activities in household appliances by manufacturing washing
machines.
In 1978, Samsung crossed the 4 million black and white TV sold
and entered the microwave oven sector. Then, from the 1980s, Samsung became
a major player in telecommunications products such as telephones, fax machines
and began production of mobile phones through its subsidiary, Samsung
Electronics.
This period also marks the further internationalization of
Samsung. The group is established in New York, Texas, England, Japan and
Portugal.
Samsung is also a manufacturer of energy, gas and oil
infrastructures such as pipelines, offshore oil extraction vessels on the high
seas as well as certain types of power plants and water treatment plants.
The Samsung group also has activities in building construction
engineering. The subsidiary has participated in very large projects such
as the Burl Khalifa tower in the United Arab Emirates with a height of around
one kilometer, as well as the Petronas twin towers in Malaysia over 410 meters
high, which required 37,000 tonnes of steel and 160,000 m3 of concrete.
Between 1993 and 2005, Samsung has dozens of subsidiaries and
the group is very diverse.
During this period, the group's strategy wished to refocus on
three sectors: electronics, chemicals and engineering. To achieve these
goals, Samsung sells some of its subsidiaries and reorganizes its
staff. This is how the group began in a major activity: the manufacture of
LCD panels, liquid crystal screens. The group then becomes one of the
leaders of the flat screen.
In 2006, Samsung signed a 50/50 partnership with Sony for the
mass production of LCD TVs. In 2011, Samsung took full control of this
industry.
The Samsung group is also present in the biopharmaceutical
sector and is a partner of the Biogen group. Its investments in this
sector are in the hundreds of millions of dollars. In parallel, the
expansion of the mobile has benefited Samsung which became the world leader in
2012 in terms of volumes of smartphones sold. The “Galaxy” series are
currently enjoying worldwide success.
As you can see, Samsung is a multinational company out of thin
air that has become a real empire in many sectors.
SAMSUNG PRODUCT LINE: SMARTPHONES,
TELEVISIONS, TABLETS AND REFRIGERATORS
Samsung Electronics designs and markets smartphones, energizer
phone, Asrujtablets, HD (High Definition) and Ultra High Definition LED TVs,
mi note 7 pro,
redmi note 7 sales
household appliance products (fridge, ovens, washing machines, air
conditioning, etc.) as well as a wide range small appliances, computer products
such as flat screens, hard drives and many accessories.
Samsung offers its products for direct sale, used cell phones
replace, samsung
galaxy m20 next sale, in particular through its websites, but most of the
products are sold through other distributors: supermarkets, electronics stores,
retailers, telecom operators, etc.
Samsung Electronics products offer a wide price range, ranging
from less than € 30 for the most basic models, to more than € 700 like the
Galaxy Note 10+ smartphone, for example.
Samsung is a brand that has an international reputation for the
quality and advanced technology of its products. The brand is also the
world leader in terms of market share of smartphones and LED TVs.
PROFILE OF THE GROUP, BUSINESS SECTORS
AND SUBSIDIARIES OF SAMSUNG WORLDWIDE
Samsung is a multinational giant, ultra diversified. In
fact, no less than 59 subsidiaries are integrated into the Samsung universe and
more than 400,000 employees work there.
Samsung Electronics: Led TV and electronic products
Main segment of the Samsung group, world leader in smartphones
and LED TVs, the group manufactures many electronic products such as printers,
semiconductors as well as products in the household appliance sector.
Samsung Biologics: plant biopharmaceuticals
Founded in 2011, Samsung Biologics is a multinational company active
in Research & Development, manufacturing and distribution of
biopharmaceutical products, focused on herbal therapies.
Samsung C&T Corporation: infrastructure, clothing and
leisure spaces
Samsung Construction & Trading Corporation is diversified in
three sectors:
- The
engineering of skyscraper-type infrastructures that can reach more than 800
meters in height, the construction of roads, bridges, tunnels, metros,
etc., as well as participation in the construction of conventional and
nuclear power plants.
- International
clothing marketing with
Fashion Group.
- Development
and management of leisure areas with Everland Resort, such as golf courses,
theme parks, hotels, restaurants, etc.
Samsung Life Insurance: life insurance, health insurance and
annuities
Samsung has a large subsidiary in the life insurance, health insurance, and annuity-type
contracts. In 2010, the listing of Samsung Life Insurance for $ 4.4
billion dollars was the largest in the history of Korean IPOs.
Samsung Fire & Marine Insurance: risk and property damage
insurance
This subsidiary integrates general property damage insurance
activities. It also offers specific risk cover contracts for businesses
and individuals.
SFMI (Samsung Fire & Marine Insurance) is the leader in
damage insurance in Korea. It has an international presence in 11
countries.
Samsung Heavy Industries: offshore oil extraction vessels
It is one of the world leaders in the manufacture of offshore
oil extraction vessels on the high seas, reaching values close to a billion dollars. The
group also designs freight transport vessels.
Samsung Engineering: hydrocarbon and gas pipelines
Samsung Engineering is an actor of the energy industry present
on three branches: hydrocarbons, power, industrial and environmental
branch. Samsung Engineering offers gas pipelines and hydraulic treatment
devices, fuel oil, gasification, water treatment, etc.
In short, the Samsung Galaxy has many other subsidiaries whose
list would take a long time to summarize. The best known is Samsung
Electronics, listed on the KSE (Korean Stock Exchange).
SAMSUNG: ANALYSIS OF FINANCIAL RESULTS
AND STOCK MARKET VALUATION
Samsung turnover over the last 9 years
Sales of Samsung
Electronics between 2011 and 2019 (in billions of $)
Samsung Electronics turnover evolves in thresholds between $
154.05 and $ 221.57 billion between 2011 and 2019. It is up + 41% between 2011
and 2013, then begins a downward phase between 2013 and 2015 from -
20%. It then stabilizes at around $ 220 billion in 2017 and 2018, to fall
back to $ 207 billion in 2019.
Samsung's benefits: bullish phase then decline
Samsung's profits between
2011 and 2019 (in billions of $)
Samsung's profits follow the same trend as turnover but in an
amplified way, namely an upward phase between 2011 and 2013 of + 125%, then a
decline of 43% between 2013 and 2015.
Samsung Electronics' profits were $ 38.34 billion and $ 40.31
billion in 2017 and 2018, then lost half of their value in 2019 to $ 19.55
billion in 2019.
Assessment of the leader of smartphones Samsung
In its last annual balance sheet closed on December 31, 2019,
Samsung Electronics has total assets of $ 305.54 billion and shareholders'
equity of $ 227.82 billion, or $ 33.18 per share. .
On the assets side of its balance sheet, Samsung has $ 103.84
billion in property, plant and equipment (physical assets intended for
long-term preservation) as well as $ 114.7 billion in cash, cash equivalents
and financial investments. .
Samsung Electronics' total liabilities are $ 77.72 billion and
mainly include deferred charges of $ 27.18 billion, as well as financial debt
of $ 15.96 billion.
Samsung financial ratios
At its closing stock price on January 31, 2020 established at
KRW 57,200 or $ 47.83, Samsung has good financial ratios. On the profit
side, the group generated 3,166 KRW of earnings per share (EPS) in 2019, or $
2.74, while its share price is established at $ 47.83.
The Samsung Electronics share therefore offers a profitability
ratio established at 5.73% at its current price.
With a PER of 17.45 and EPS of $ 2.74 in 2019, compared to a current
share price of $ 47.83, Samsung Electronics is paid on the stock market 17.45
times its profits.
In terms of balance sheet valuation, Samsung's equity was $
33.18 per share as of December 31, 2019, a third below its market price.
The group also has a low debt-to-equity ratio of 7%.
These ratios are strictly taken from the financial reports of
Samsung Electronics. They indicate a good valuation of the group in terms
of market capitalization compared to the value of its net assets (equity) or in
other words: what the Samsung Electronics group has subtracted from what it
owes.
STOCK MARKET: EVOLUTION OF THE SAMSUNG
SHARE PRICE
Samsung Electronics price
chart since 2011 (in KRW, Wons)
Samsung Electronics' share price was around 19,000 KRW ($ 16.90)
in early 2011.
It then moved into thresholds between KRW 21,500 ($ 20.23) and
KRW 31,000 ($ 25.62) between early 2013 and early 2016, before initiating a
marked upward trend of + 150% between early February 2016 and early November
2017.
Then, the share price of Samsung Electronics lost a third of its
value between the beginning of November 2017 and the end of December 2018,
before resuming an upward trend of + 53% since the beginning of 2019 to settle
at more than 57,000 KRW.
SAMSUNG ON THE STOCK MARKET: SHOULD WE
INVEST IN THE SMARTPHONE LEADER?
First, note that Samsung is a profitable group because for $
199.67 billion in revenue in 2019, the company made a profit of $ 18.84
billion, or a high profit margin of more than 9 , 5%.
Then, the market valuation of the Samsung Electronics group is
currently $ 318 billion, a third below its net asset value on its balance sheet
for $ 236 billion. This level of valuation is interesting in view of a
large profitable group with good profitability and having a leading position in
its sector.
On the profit side, Samsung generated $ 18.84 billion in 2019, a
marked decline since 2018 ($ 40.31 billion) because having been halved, in
particular due to the semiconductor activity and more particularly memory chips
for smartphones and PCs (turnover down 25% since last year).
Although the financial ratios of Samsung Electronics currently
remain attractive with almost 6% of profitability and a reasonable valuation on
the balance sheet, the investor wishing to invest in this company should
nevertheless monitor, on a quarterly basis, the future profits in order to note
if this erosion of the 2019 profit remains exceptional.
The current valuation on the stock market of the Samsung
Electronics share therefore remains particularly interesting with regard to
these elements, without forgetting that the group occupies the position of
world leader in smartphones and LED TVs.
In addition, the group has very low debt with a financial debt
to equity ratio of 7%.
In conclusion, unless there is an unfavorable and lasting
reversal of the profits that will have to be monitored, in view of the good
fundamentals of the group, our evaluation remains positive for Samsung
Electronics at its current share price of 57,200 KRW ($ 47.83 ).
Applied KRW / USD conversion rate:
- For
data relating to financial results at December 31, 2019: 1 KRW = 0.000867
USD
- For
the share price on January 31, 2020: 1 KRW = 0.000836 USD
- For
graphical analysis: conversion rate corresponding to the periods analyzed.
