BEST SMALL CAP COMPANY
JB Financial Group
Most provincial banks in South Korea have kept their focus on customers in their own backyard JB Financial Group’s management decided to dream big. Expansion plans are brewing at the financial group, which is the parent of Jeongu City-based Jeonbuk Bank, and analysts are optimistic these could lead it to compete with stronger and larger banking competitors, even in cities like Seoul.
Instead of focusing on the traditional banking model that caters to customers at bank branches, the group’s management is slashing cost-to-income ratios by moving its business online and opening smaller branches that have less staff in major cities to support its online strategy.
“In Korea you don’t need a national licence but most regionals don’t do it [expand across the country] because they don’t have the expertise,” says Michael Na, an equity analyst at Nomura. “But this company was able to expand by adapting a direct banking model to do that.”
Jeonbuk Bank is offering higher deposit rates of 20 basis points (bp) or more than those of competitors to lure more customers in the major cities at a time when Korean deposit rates are about 2.9% for a 12-month deposit.
Na says he expect JB Financial to achieve cost savings of about 60bp in the long term.
BEST MEDIUM CAP COMPANY
Dongbu Insurance
Delivering solid compound annual growth rate (CAGR) for nearly a decade would be a challenging feat for most Korean companies, especially given that low investment margins and rising household debt have put a strain on the country’s economy ever since the 2008 global financial crisis.
But Dongbu Insurance has delivered 15% compound annual growth for the past eight years. The way it has done so is by cutting the cost of running its operations. Its success in doing so has contributed to the fact that Dongbu’s return on equity is about four percentage points higher than its competitors, according to an equity analyst.
Additionally, strict risk management also allowed the company to steer clear from major mishaps in managing insurance risk, which is difficult in an industry prone to such incidents.
Currently Dongbu Insurance is in the process of mandating banks for an initial public offering (IPO) that is planned for next year. A successful stock market debut would make it the fourth listed insurance company in South Korea after Samsung Insurance, Hanhwa Insurance and Tongyang Insurance.
BEST LARGE CAP COMPANY
Hyundai Motor
The South Korean car company’s business strategy has helped it reap success even in more difficult times this year, with competition rising from Japanese rivals Toyota and Nissan courtesy of Abenomics.
Hyundai Motor maintained its strong market standing through unconventional tactics. Principally it shocked observers by offer a 10-year warranty pledge on its automobiles.
“It not only changed the perception of Korean cars, it changed the behavior of its employees,” says an equity analyst. “Employees always thought they were behind Japan and other carmakers, but after the warranty system was put in place that meant that their warranty costs could go up. That really pushed them to take extra care in the quality of manufacturing cars.”
Subsequent successes included the appointment of Peter Schreyer to oversee Hyundai and Kia’s designs and boost synergies between the two brands, which has helped Hyundai develop slicker looks for its automobiles.
Management has also used margins incurred from a weaker won to increase spending in marketing instead of cutting the cost of the cars. It’s a sensible move; cutting prices would have made it tougher to raise them once more when the won strengthens again, while it would also have hurt the value of used cars.
Hyundai’s willingness to bet on its own products has left it looking well-placed, despite the rising threat from its rivals. The fact that its cars are cheaper and have more gas mileage doesn’t hurt.
BEST EXECUTIVE
Jung Yeon-Joo, chief executive of Samsung C&T
Jung Yeon-joo has been able to show his business acumen through actual numbers during his stint at different Samsung subsidiaries. His strategic mind is also bearing fruit during his tenure at Samsung C&T.
During his leadership at Samsung Engineering since 2003, Jung was able to provide consist growth through winning EPC contracts for industrial plants. He delivered CAGR of 17% on average through 2009, during which the stock price of Samsung Engineering shot up a whopping 34 times from KRW3,500 ($3.20)to KRW120,000.
Jung was moved to Samsung C&T in 2009, but he continued to demonstrate his ability to grow his company in his new role. Since joining C&T, the subsidiary of Samsung Group has provided average new order growth of 15% per year.
The ability for C&T to maintain its stature as one of the strongest builders in Korea comes after the company has won meaty contracts including a US$2.2 billion deal to build subway lines in Saudi Arabia. It has also been selected as the sole contractor on a US$225 million project to build subway lines in Singapore.