Mike Wood On Samsung Electronics The Unsung Hero – ValueWalk Premium
Samsung Galaxy S5

Mike Wood On Samsung Electronics The Unsung Hero

he 10th Annual New York Value Investing Congress takes place in New York on September 8th and September 9th 2014. ValueWalk will be providing coverage of the event- below is a summary of the long case for Samsung Samsung Electronics Co LTD (OTCMKTS:SSNLF) (KRX:005930)

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Mike Wood Samsung Electronics: The Unsung Hero

This is the FactSet Best International Idea Contest by SZ winner.

Samsung Electronics Co LTD (OTCMKTS:SSNLF) (KRX:005930)'s businesses are not well understood, have strong market share and trades at a steep discount to intrinsic value.

Part of the reason for mispricing is the lack of a listing in New York and the need to register with Korea to purchase.

Trades at less than an 8x P/E and 1.2x book value with a big net cash position. Downside risks are more short-term driven but the main points are: success hinges on Galaxy S franchise, no growth, etc.

Excluding IT & Mobile business, still thinks the stock has 30% upside from today's level.Using a sum of the parts analysis, believes shares have 150% upside.Values cash at par, $60bn. Semiconductor business worth $130bn based on 10x operating profit (trades at a discount to other semi peers but likely worth a premium). Display business worth $33bn on a 10x multiple. Consumer electronics valued at 8.5x and worth $13bn. IT & Mobile valued at 8x and worth $206bn.

These pieces add up to $442bn. Several tech products should provide good growth in the future such as chromebook laptops and smartwatches.

Samsung is undergoing succession planning as the current Chairman has health issues and looks to transfer his position and 49.7% controlling stake to his son and current Vice Chairman.

Strong R&D efforts, employee incentives, brand awareness and vertical integration also should benefit the company in the long-run.

Samsung Electronics Co LTD catalysts

Could use IPOs of various businesses to create value and transfer controlling stake with tax benefits to Chairman's son.

Can purchase on the London Stock Exchange or directly in Korean markets. Best way to play is through Samsung Preferred Stock.

Mike Wood On Samsung Electronics The Unsung Hero


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