‘Korean companies still remain cheap compared to global peers’: MBK Partners chairman

MBK Partners' founder and chairman Michael ByungJu Kim / Courtesy of MBK Partners

Michael ByungJu Kim, co-founder and chairman of global private equity firm MBK Partners, said Korea’s discounted share prices continue to provide opportunities for value investments.In an annual letter to investors, the chief of the equity firm that primarily invests in Asian markets, said Korean companies are still traded at cheaper prices than their fundamental values compared to their global peers — at both public and private markets.”Korea remains cheap. Historically, Korean companies have traded at a ‘K-discount,’ largely due to perceived poor corporate governance by controlling chaebol families,” Kim said in the letter, pointing out that Korea’s main benchmark KOSPI is traded at lower multiples than its Japanese and Chinese counterparts, the Nikkei and the Shanghai Composite, respectively.”The K-discount extends to the private market. Our investments in this market were done at a 25 percent discount on average to the global comparables. Korea is the value market of Asia,” he added.He went on to say that Korea has demonstrated a comparative strength in the private equity sector among Asian countries. While the country’s GDP stands as the 10th largest in the world, Korea ranks in the top five globally in the number of large-cap companies. It also exhibits the highest private equity (PE) penetration at 0.8 percent of GDP in Asia.Kim partly attributes this to the Korean Private Equity Law, passed in 2005, which has been a game changer in fostering the development of the domestic private equity industry.Yet, he said Korea’s unique structure of family-owned conglomerates has generated various deal opportunities.

“The distinctive architecture of Korea Inc., built around chaebol, has lent itself to a robust private equity market. These family-owned conglomerates historically have thrown off consistently strong deal flow from strategic sales of non-core assets and liquidity needs. We have been the dominant leader in chaebol divestitures,” the annual letter to investors stated.”Recently, we have seen the opportunity set augmented, with an increasing volume of sales of large, non-chaebol companies due to founder succession issues. Two of our investments last year, Medit and Osstem Implant, fall into this category. This diversification of deal sources is a welcome sign of a maturing private market,” the letter continued.Additionally, Kim underscored the company’s unchanged conviction in the further growth of North Asian economies, notably Korea, Japan and China. He said while Korea and Japan are currently showing strengths in buyout markets in Asia, China’s mid- and long-term growth potential remains relevant despite recent slowdowns in equity market and PE deal flows.”Many of our general partner (GP) peers have retrenched from China. But we do not believe this represents a Fukuyamaeqsue ‘end of history’ of China. China is too large an economy, with a burgeoning consumer class of nearly a billion people, and its private market is too important for it not to resume its growth drive,” he said.”What we’re going through is a period of growing pains in a generational political-economic development story, not the end of the Great China Experiment. We are believers in China in the mid- to long term. For now, it’s mostly Korea plus Japan for us. But China shall return,” Kim’s letter emphasized.MBK Partners manages over $30 billion in capital across six buyout and two special situations funds. Since the firm’s founding in 2005, the company has made 72 investments in Korea, Japan and China, 메이저 with over $6.5 billion remaining in cash reserves.

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