5 Dirt Cheap Korean Small Caps
Decent companies at absurdly cheap prices 🇰🇷
Dear Readers,
Welcome to another edition of ROE The Boat.
There’s a few reasons why South Korea could be a good hunting ground for value investors.
Following Japan’s lead, reforms are currently being implemented that will push listed companies to improve capital allocation and increase returns for shareholders.
These changes aim to reverse the chronic undervaluation of South Korean stocks, which has been mainly driven by weak governance and meager shareholder returns. The reforms have evolved from optional guidelines into mandatory legal obligations.
Another catalyst is Interactive Brokers, one of the world’s largest brokers, has recently enabled trading in South Korean public companies - this should provide more liquidity.
There’s certainly plenty of value to be found in the small and microcap segment of the KOSDAQ.
For this issue of ROE The Boat I want to highlight five companies I think are worthy of your attention.
Every month we publish exclusive research on profitable growing small/microcaps trading at cheap prices.
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These companies have the following characteristics →
Company #1 -
Manufacturer of mission critical components that supply energy, semiconductor and infrastructure companies around the world.
Operating margins 27%
ROCE 12%
PE 9
No net debt
Buying back shares
Company #2 -
Family run microcap with a monopolistic business and hard-to-replicate physical assets. AI will definitely not be replacing this business.
PE of 4
PB of 0.38
Company #3 -
Quality founder led healthcare compounder. Selling much needed products to hospitals and clinics in South Korea and internationally.
Operating margins 30%
ROCE 37%
No net debt
PE 9
Company #4 -
Consumer defensive business in deep value territory.
No net debt
PE 4
PB 0.42
Company #5 -
High-quality data business with sticky recurring revenue.
Operating margins 17%
ROCE 18%
No net debt
PE 6
Dividend yield 4%
Let’s dive in…
Please note: this article should act as an introduction to the company mentioned and is not a complete deep dive. Make sure you do your own research before investing in any company mentioned in this newsletter.