HYUD - Hyundai preferred

[LC]

Walter Schloss didn't have the balls to put on a 15% position, either. The problem with Tilson isn't the small position size but the lack of outperformance.

[fareastwarriors]

Hyundai Motor Workers Walk Off Job to Protest Land Purchase

 

Auto Maker's $10 Billion Land Purchase Becoming Flash Point for Corporate Governance Concerns

 

http://online.wsj.com/articles/hyundai-motor-workers-walk-off-job-to-protest-land-purchase-1411474754

[muscleman]

Hyundai Motor Workers Walk Off Job to Protest Land Purchase

 

Auto Maker's $10 Billion Land Purchase Becoming Flash Point for Corporate Governance Concerns

 

http://online.wsj.com/articles/hyundai-motor-workers-walk-off-job-to-protest-land-purchase-1411474754

 

I wonder if this can have any effects at all? Maybe Hyundai will agree to increase the wages, and then shareholders gets hurt really bad?

[Picasso]

Hyundai Motor to Pay 55% of $10 Billion Seoul Property Purchase

 

    Hyundai Motor’s portion of the payment will amount to 5.8

trillion won, followed by Hyundai Mobis Co.’s 2.64 trillion won

and Kia Motors Corp.’s 2.11 trillion won, the companies said in

statements today. All three companies are part of the Hyundai

Motor Group and share the same billionaire chairman, Chung Mong

Koo.

[muscleman]

Hyundai Motor to Pay 55% of $10 Billion Seoul Property Purchase

 

    Hyundai Motor’s portion of the payment will amount to 5.8

trillion won, followed by Hyundai Mobis Co.’s 2.64 trillion won

and Kia Motors Corp.’s 2.11 trillion won, the companies said in

statements today. All three companies are part of the Hyundai

Motor Group and share the same billionaire chairman, Chung Mong

Koo.

 

I have existed the preferreds at 125000 won. Pretty disappointing development, given it was at one time 160000 won.  Well, at least I didn't lose money. ::) Guess that's because I was lucky and bought at 2014 year low of 113000.

 

The reason for the exist:

1. The unions start to fight back furiously, and their argument is simple: Since you can pay outrageous prices to a land parcel, why can't you raise our paychecks? I think this may turn into an eventual pay raise, and Hyundai's profit will erase. What's cheap now (4 PE) may soon become 6 PE, making the preferreds no longer cheap.  Companies like Ford trades at just 9 PE with good management. Why should Hyundai preferred trade at that kind of PE, given the lack of voting rights, less liquidity?

 

2. The major bull move from 2011 depends largely on the "Discount to common will soon close" story, especially fueled by Li Lu's speech. Now I think that story is over.

 

With that said, I would be interested in buying other Korean preferreds, if management is more shareholder friendly and focuses on per share intrinsic value growth, not empire building. Do you know any? :)

 

 

[bobozou]

Muscleman - though I still hold the Hyundai preferreds, I share your concerns/sentiment

 

My suggestion would be to, instead of trying to find 1-2 companies with management teams that have good fiduciary sense (very hard task), just buying a basket of 15-20 preferred shares.  Given the language/cultural barriers, I've felt like this strategy provided a 'safer', more diversified approach.

[Packer16]

Alternatively find stocks that are cheap and buy preferreds associated with them.  I could not find 15-20 that would be both cheap and find a good sized discount.  Remember the discount might be there and be high because the common is overvalued.

 

Packer

[investor-man]

Saw this economist article talking about the proposed tax on cash: http://www.economist.com/news/finance-and-economics/21620287-south-koreas-government-tries-get-firms-spend-their-accumulated-riches

 

I really hope this doesn't translate into stupid spending for the other chaebols out there. This move by Hyundai is seriously disappointing, and I don't even own any!

[muscleman]

Muscleman - though I still hold the Hyundai preferreds, I share your concerns/sentiment

 

My suggestion would be to, instead of trying to find 1-2 companies with management teams that have good fiduciary sense (very hard task), just buying a basket of 15-20 preferred shares.  Given the language/cultural barriers, I've felt like this strategy provided a 'safer', more diversified approach.

 

This company is just like most Japanese net-net, which should have been worth 3x-5x if management take shareholder friendly actions. Otherwise if they have no intent to return cash to shareholders, they will make more of such frivolous spendings to avoid excess cash tax. ::)

 

When such things happen in the US, an activist will stand up and call for actions. But in Korea, with controlling stake in the families, I don't think anything can be done for shareholders at all.

[alwaysinvert]

To be fair, in terms of shareholder interest, there might very well be some extra government goodwill coming Hyundai's way after overpaying to a state-owned corporation. I don't think we as non-Koreans have a full understanding of the situation here. Obviously, whichever way you cut it, this is not undividedly good for shareholders, but there could be a lot more to the story than just empire building.

[fareastwarriors]

Hyundai's Gangnam Land Purchase Carries a Financial Benefit

 

Despite Stock Slump, Real-Estate Deal Has Tax Advantages

 

 

http://online.wsj.com/articles/hyundais-gangnam-land-purchase-carries-a-financial-benefit-1411721825?mod=WSJ_hps_sections_management

[bizaro86]

I've had a couple of PMs about the mechanics of the preferred shares trading in London, so I thought I'd post the information publicly. They trade as HYUD in London, but the shares trade/settle in USD. Also, it takes 2 of the HYUD shares to equal one of the Korean traded shares.

 

https://wwss.citissb.com/adr/guides/pgm_dispdsf.aspx?pageId=8&subPageId=191&company=H

 

[bobozou]

any other shareholders of korean preferreds (in general, not just hyundai) out there that feel like they need some therapy/counseling after the blood bath that was the last month or so (since the hyundai fiasco...)

 

it feels like that 'transaction' single handedly started a bear market in korean prefs, in general

 

anyone else adding? 

 

anyone selling/quitting?

 

personally, i'll stick to the thesis and view it as a (psychologically painful) buying opportunity

[investor-man]

any other shareholders of korean preferreds (in general, not just hyundai) out there that feel like they need some therapy/counseling after the blood bath that was the last month or so (since the hyundai fiasco...)

 

it feels like that 'transaction' single handedly started a bear market in korean prefs, in general

 

anyone else adding? 

 

anyone selling/quitting?

 

personally, i'll stick to the thesis and view it as a (psychologically painful) buying opportunity

 

I hear ya man :)  I think Apple's iPhone release coupled with Samsung's massive drop in profits didn't help either. I saw an article (somewhere) that said September saw more net sales of stock out of Korea than buys into Korea for the first time in a while. For me this came coupled with the drop in the Russell 2000 and iron ore hitting a 5 year low. September was not a good month on my psyche, but as just about every value investing book and countless people on this board say: selling right now is when you lose money. My thesis hasn't changed, and fortunately I'm pretty laid back, so I can handle the volatility.

[AtlCDore]

I get the sense that a number of hedge funds are long the Korean Pfd trade. 

 

If we are in the midst of a real sell off then it wouldn't surprise me to see this sector get hit as funds sell for cash.  Back in 2008 the small cap space got decimated as hedge funds were long the illiquid micro/small cap names and they had to sell into a market where there were very few buyers.  The SPAC names were also heavily owned by hedge funds who had to get out in 2008 and 2009.  Ironically, that killed the SPAC game until fairly recently. 

 

I have started to look at WKOF as a potential purchase.

[JBird]

any other shareholders of korean preferreds (in general, not just hyundai) out there that feel like they need some therapy/counseling after the blood bath that was the last month or so (since the hyundai fiasco...)

 

it feels like that 'transaction' single handedly started a bear market in korean prefs, in general

 

anyone else adding? 

 

anyone selling/quitting?

 

personally, i'll stick to the thesis and view it as a (psychologically painful) buying opportunity

 

I try to view these drops with equanimity. My thesis hasn't changed generally-- though Hyundai did destroy some value.

[Packer16]

These are getting hit pretty hard like the rest of the market.  Many of mine have returned to a 50%+ discount to the common in addition to the common going down.  I see this as a coiled spring just getting compressed.

 

Packer

[compoundinglife]

Sorry if this has been asked already but are there OTC symbols for the prefs?

 

So far I can find HYMLF and HYMTF big per share price difference but can't confirm which securities these actually are.

[cobafdek]

Sorry if this has been asked already but are there OTC symbols for the prefs?

 

If I understand it correctly, there are some U.S. market makers that trade some of these as foreign ordinary shares on the OTC gray market.  I bought through Fidelity, which routes the orders to the local Korean market.  Three of my Korean preferreds happened to have a foreign ordinary (symbols end in -F):  TYOOF (Taeyoung Engineering 009415), NXEPF (Nexen Tire Corp 002355), and LTTTF (Lotte Chilsung 005305).  During my phone order, the Fidelity trader looks it up and tells me whether it will appear on my account as a foreign ordinary share (if available); otherwise, it will be reported by a CUSIP number.  For some reason unknown to me, when I look up by OTC symbol the next day on Yahoo Finance, Google Finance, or TD Ameritrade, usually there is zero trading volume reported.  Given the thin trading volume on the OTC gray,  I don't think one can simply enter an OTC symbol in the order box at a discount broker, and expect to get a fill for weeks, months, or ever.

 

So far I can find HYMLF and HYMTF big per share price difference but can't confirm which securities these actually are.

 

HYMLF is the parent.  HYMTF is one of the three preferreds, and represents 1/2 of the equivalent preferred share, like on the London Stock Exchange.  I have the 3rd preferred (Hyundai 005389):  since no U.S. market maker has this, Fidelity reports it to me by CUSIP number.

[investor-man]

South Korean investors shift focus to small-caps

 

http://www.ft.com/cms/s/0/c0d3d53c-4ecf-11e4-b205-00144feab7de.html#axzz3G9HQ8M14

 

(also attached)

 

[cobafdek]

To be fair, in terms of shareholder interest, there might very well be some extra government goodwill coming Hyundai's way after overpaying to a state-owned corporation. I don't think we as non-Koreans have a full understanding of the situation here. Obviously, whichever way you cut it, this is not undividedly good for shareholders, but there could be a lot more to the story than just empire building.

 

"The Hyundai chairman reportedly told directors during the bidding process that 'money is no problem'.  After the offer was accepted, he remarked that the 'huge sum' was Hyundai's way of contributing to the nation:  the seller was Korea Electric Power Corp (Kepco), the financially troubled national utility."

 

"'The founding families think of the company first above everything else,' says Michael Oh, a fund manager at Matthews Asia.  'They want the company to survive for generations to come - they think of a much longer time horizon than the outside shareholders.'"

 

"The chaebol now have to contend with an investor wielding unprecedented clout:  the South Korean National Pension Service, with total assets that have grown rapidly to $400bn, including a stake of more than 6% in the entire stock market."

 

The whole article here:  http://www.ft.com/intl/cms/s/0/9d84d488-5f90-11e4-8c27-00144feabdc0.html#axzz3HveRFHSn

[fareastwarriors]

U.S. Fines Hyundai, Kia for Fuel Claims

 

Penalty of $300 Million Is Largest Ever, Could Set Pricey Precedent for Other Auto Makers

 

http://online.wsj.com/articles/u-s-fines-hyundai-kia-for-overstating-fuel-economy-1415028646?mod=WSJ_hp_LEFTWhatsNewsCollection

[TwoCitiesCapital]

http://www.bloomberg.com/news/articles/2015-06-02/hyundai-motor-falls-to-four-year-low-after-domestic-sales-slump

 

Hyundai Motor Co. fell to the lowest level in almost five years in Seoul trading after the Korean carmaker’s domestic sales declined for a second month.

Hyundai dropped 10 percent to 138,500 won at the close in Seoul trading, the lowest since August 2010. The company said Monday its South Korean deliveries in May fell 8.2 percent from a year earlier, while overseas sales declined 6.1 percent.

The carmaker failed to boost deliveries at home even after offering price cuts on most models as well as interest-free loans, a sales tactic it last used during the Asian financial crisis almost two decades ago. In overseas markets, a weaker yen gave Hyundai’s Japanese rivals a competitive edge.

[AJB96]

Hyundai recently poached the head of BMW's M performance line:

 

http://www.autoblog.com/2014/12/22/hyundai-poaches-bmw-m-engineering-chief/

 

and also poached the head of design for Lamborghini and Bentley:

 

http://indianautosblog.com/2015/06/luc-donckerwolke-move-to-hyundai-181810

 

Alex

[kab60]

Keeps going down. 3,5 divy yield now so might be easier for some to hold than before.