Samsung’s new general Lee giving more to investors in firm
A change at at the top at Samsung, Korea's biggest conglomerate, is ushering in a major shift in what the group does with its huge cash pile and in its relationship with investors.
Where Samsung patriarch Lee Kun-hee (73), hospitalised from a heart attack 18 months ago, prioritised cash for long-term investments, heir-apparent Jay Y Lee appears willing to give more money to shareholders.
That could go some way to win over shareholders whose support the Lee family will need for future restructuring moves.
Samsung firms have this year announced or completed 13.4 trillion won ($11.78 billion) worth of buybacks, and flagship Samsung Electronics has also said it will hand shareholders up to 50pc of its annual free cash flow over three years. Nomura estimates that could amount to as much as 22.9 trillion won.
"In the past, Samsung Group focused on growth in quantity, but (Samsung Electronics) vice chairman Jay Y Lee wants qualitative improvements," said a person with direct knowledge of the matter, who declined to be named due to the sensitivity of the issue.
"Shareholder returns initiatives are part of this goal."
Investors and analysts say the buybacks, and higher dividend payouts, will improve Samsung companies' standing among shareholders by showing a greater willingness to accommodate their interests, and boosting stock prices.
Samsung Group and Samsung Electronics declined to comment.
Longer-term, though, the conglomerate will only be able to count on continued shareholder backing if it can deliver new growth engines as its smartphone momentum stalls.
Samsung Group in the past may have been frugal with shareholder returns, but successful investments rewarded investors over the years with record share prices.
Samsung Group companies are pushing into new businesses such as autos and pharmaceuticals, but it could take several years before investors can see that these are real future growth drivers.
"Samsung is peerless in South Korea in terms of money, people and technology - things that are important for new growth areas," said Baik Jae-yer, a fund manager at Korea Investment Management, which holds shares in various Samsung companies.
"That gives them better odds, but doesn't guarantee success."
Also under Jay Y Lee's stewardship, Samsung has pushed through further restructuring steps, shedding non-core assets such as its chemicals businesses.
Shares of Samsung Electronics trade at below 10 times expected earnings, well below tech rivals Apple whose iPhone competes with the Galaxy and Alphabet.
That's partly because the chips-to-smartphones giant was reluctant to part with more of its near-70 trillion won ($61.2 billion) cash pile, with some investors suspecting the money will ultimately be used to further the Lee family's succession needs.
Despite investor discontent and some internal calls for a change of policy on dividends and buybacks, Samsung Electronics publicly stressed its preference to use cash for long-term investments over boosting payouts.
The trigger for change, though, was a prolonged slump in the company's share price, with the younger Lee playing a pivotal role in authorising a record 11.3 trillion won buyback.