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.