Exclusive
KORAIL Retail's attempt to sell shares in SM Asset Development and HDC I'Park Mall fails three times

[비즈한국] KORAIL Retail is experiencing difficulties in selling its shareholdings. KORAIL Retail recently issued a bid notice for the sale of shares in SM Asset Development and HDC I'Park Mall. However, the bidding failed three times as no potential buyers emerged.

On January 14, KORAIL Retail posted a bid notice on Onbid to sell 687 shares of SM Asset Development and 40,000 shares of HDC I'Park Mall. Onbid is an electronic asset disposal system operated by the Korea Asset Management Corporation (KAMCO). The winning bidder is determined by whoever offers the highest price above the minimum sale price set by KORAIL Retail. KORAIL Retail set the total expected sale price for the SM Asset Development and HDC I'Park Mall shares at 86.58 million won. If two or more bidders offer the same highest price, the winner is decided by a lottery. However, no bidders appeared.

KORAIL Retail's attempt to sell the SM Asset Development and HDC I'Park Mall shares is interpreted as a reflection of public institution innovation guidelines. In July 2022, the Ministry of Economy and Finance (MOEF) announced the 'New Government Public Institution Innovation Guidelines.' At the time, the ministry stated, "We will sell unnecessary and non-urgent assets, such as those with low relevance to our primary functions, those used for excessive employee benefits, or idle assets," adding, "We will reorganize stakes in invested companies that are unrelated to core business functions or where the recovery of investment capital is uncertain due to increasing losses."

KORAIL Retail's financial structure is not poor. In 2023, it recorded 599.2 billion won in revenue and 6.5 billion won in operating profit, with a debt-to-equity ratio of 74.37%, which is at a healthy level. Performance for 2024 has not yet been released. The problem is its parent company, the Korea Railroad Corporation (KORAIL). KORAIL has shown no signs of emerging from years of deficits, recording 6.373 trillion won in revenue and 441.5 billion won in operating losses in 2023. As of the end of June 2024, KORAIL's debt-to-equity ratio stood at 252.40%.

Still, no prospective buyers for the SM Asset Development and HDC I'Park Mall shares have emerged. KORAIL Retail issued a re-bidding notice on January 23 and a third notice on February 11, but failed in all three attempts. In the re-bidding and third notice, KORAIL Retail maintained the initial expected sale price of 86.58 million won. Because of this, suggestions are being made that the expected sale price should be lowered.

The sale of SM Asset Development and HDC I'Park Mall shares appears unlikely to be easy in the future. The 2023 revenue of SM Asset Development and HDC I'Park Mall—59.5 billion won and 139.5 billion won respectively—shows that their performance is not bad. However, when converted into shareholding percentages, 687 shares of SM Asset Development and 40,000 shares of HDC I'Park Mall account for only 0.01% and 0.11%, respectively. Even if one were to acquire these shares, the impact on management rights would be negligible. Furthermore, both are unlisted companies and have never announced plans for an IPO. From a buyer's perspective, it is difficult to expect capital gains from stock price appreciation.

In response, a KORAIL Retail official stated, "(The sale of shares in SM Asset Development and HDC I'Park Mall) is being conducted as part of the public institution innovation plan," adding, "Nothing has been decided regarding future plans."