In my last posts you can see that I am far away from Dividend Aristocrats. I looked at Alphabet, Microsoft and now I will have a look on Samsung. Generally I think that shares are in short term too expensive, volatility is too low and investors are seeing everything in positive way. This is why I prefer to spend this time for widening my investment spectrum and not by going over and over through the same expensive companies. I think that such approach brings more value (know-how) for me and I hope it will make my blog even more interesting.
Everyone knows what Samsung is doing. Samsung Galaxy, some TVs and other consumer electronics. But truth to tell, we should also remember that huge part of Samsung business is B2B segment, especially semiconductors. This is why Samsung’s business is way more diversified than Apple. That has both pros and cons in the long term.
We can see that business is growing, but mainly in semiconductors. Phones are a smaller part of overall business.
Balance sheet is very strong with a net cash of around 73 KRW Trillion, quite a lot comparing to market cap of around 330 KWR Trillion.
According to 4-traders.com business is about to grow significantly, Galaxy S8 Is coming.
Valuation is not high.
Also dividend policy is quite attractive for shareholders: Our aim is to gradually increase dividend consistently. We will make quarterly dividend payments starting from 2017 which will provide more evenly distributed dividends to our shareholders. In 2016 and 2017, we will use 50% of Free Cash Flow for shareholder return in the form of dividend and share repurchase. We will use the remaining portion of Free Cash Flow after the dividend payouts for our share repurchase program and all repurchased shares will be cancelled. This will greatly contribute to increasing long-term per share value.
FCF for 2016 was 25 KWR T, so FCF yield 7.6%, 50% of it for return to shareholders, so return of around 3.8%
Comparing to Apple shares are in the similar pattern:
But valuation of Samsung is significantly lower, Apple’s P/E is around 16.2 so much much higher…
The only problem with Samsung is superb growth of share price over the last year.. around +100%. It is super hard to buy after such growth and think that this growth was during a Galaxy Note 7 recall, which might cost up to $5b.
Well and here comes the story. This Trillions of KWR means that current market cap is around 263B USD. Is $5B a lot? This is only 2% of market cap, so don’t exaggerate this amount!
Summing up, it is my first time looking at Samsung so it will be hard for me to make an immediate decision. I think that shares are cheap, but I am too reluctant to buy after such growth. Nevertheless I think that shares are worth watching and maybe after some share price correction it might be a good buying opportunity.
Disclaimer: Samsung Electronics – no position