[비즈한국] Recent reports suggest that a red light has turned on for Sambu Construction's001470 potential participation in Ukraine reconstruction projects as the company has become a target of the special counsel team investigating Kim Keon-hee (led by Special Prosecutor Min Joong-ki). Associates of First Lady Kim Keon-hee are suspected of manipulating Sambu Construction's stock price by branding it as a "Ukraine reconstruction theme stock." While the company has shown interest in reconstruction projects independent of the special counsel's investigation, it is difficult to guarantee the possibility of actual participation given the current circumstances.
In June 2022, Sambu Construction signed a Memorandum of Understanding (MOU) regarding Ukraine war recovery and reconstruction projects with DYD219550 and the Eurasia Economic Cooperation Association. DYD is the parent company of Sambu Construction. Sambu Construction and DYD stated that through the MOU, they would provide services such as building a platform for business promotion, selecting partner agencies and companies in the host country, and providing legal advice to ensure smooth project execution and profit remittance. The Eurasia Economic Cooperation Association explained that it would oversee the entire project, including preparing detailed master plans for DYD, establishing local entities, pursuing joint projects with local firms, and handling onsite inspections.
The Eurasia Economic Cooperation Association is not an organization with official representative status for Ukraine reconstruction projects. However, it cannot be said that its activities are entirely meaningless, as the association reportedly explores cooperation opportunities through forums and networking events.
The problem is that the Eurasia Economic Cooperation Association and Sambu Construction have recently been implicated in a stock price manipulation scandal involving Sambu Construction. In May 2023, the association held the "Ukraine Global Reconstruction Forum" in Poland. A Sambu Construction official who attended the forum announced that the company had signed a comprehensive MOU for reconstruction projects with the city of Konotop, Ukraine. Once this news broke, Sambu Construction was categorized as a "Ukraine reconstruction theme stock," causing its stock price to soar. The forum was attended by figures from the Yoon Suk-yeol administration, including former Minister of Land, Infrastructure and Transport Won Hee-ryong. It is known that the former minister attended the forum without an official invitation.
The involvement of Lee Jong-ho, former CEO of Black Pearl Investments, is another suspicious factor. In a 2023 chat log, Lee mentioned, "Check Sambu tomorrow." As a figure suspected of involvement in the Deutsch Motors stock manipulation case, he is also known to have personal ties to First Lady Kim Keon-hee. This is why allegations are being raised that the Yoon Suk-yeol administration induced a rise in Sambu Construction's stock price by promoting it as a theme stock.
On the 8th, the special counsel team summoned Yang Yong-ho, chairman of the Eurasia Economic Cooperation Association, and Shin Gyu-chul, former management headquarters chief of Sambu Construction, to investigate allegations related to the stock manipulation. Former CEO Lee Jong-ho argued that "Sambu" did not refer to the construction company, but to "3-bu," which means late-night golf course operating hours.
Following the inauguration of U.S. President Donald Trump, negotiations for an end to the Russia-Ukraine war are underway. Once the war ends, Ukraine reconstruction projects are expected to gain momentum. However, it is unlikely that the Eurasia Economic Cooperation Association, currently under investigation by the special counsel, will be able to lead these projects. In fact, there has been no significant news regarding the association's activities since last year.
There is also the option for Sambu Construction to pursue projects on its own. However, with its poor management status—having entered court receivership this past March—and a lack of significant presence in overseas markets, this seems unlikely. In 2019, before the COVID-19 pandemic, Sambu Construction's revenue was 226.3 billion KRW, of which only 2.76% (6.2 billion KRW) came from overseas projects. In the first half of this year, there was zero revenue from overseas projects. Additionally, the ongoing special counsel investigation makes it impossible for the company to focus on management.
Sambu Construction is not the only builder eyeing Ukraine reconstruction projects. POSCO Holdings005490 discussed cooperation measures for Ukraine reconstruction with a delegation of Ukrainian lawmakers in October 2023. Hyundai Engineering & Construction000720 also signed an agreement in November 2023 with Boryspil International Airport in Kyiv, Ukraine, to promote the "Boryspil Airport Infrastructure Expansion Project." Compared to Sambu Construction, both POSCO and Hyundai E&C have more stable finances and more active overseas portfolios. From Ukraine's perspective, partnering with large conglomerate-affiliated builders would facilitate smoother operations than working with Sambu Construction, whose future is uncertain. MOUs are not legally binding.
If Sambu Construction fails to win Ukraine reconstruction contracts, the chances of improving its finances and performance will diminish further. The company's performance has plummeted amidst the ongoing turmoil. Revenue fell by 77.24% from 204.5 billion KRW in the first half of last year to 46.6 billion KRW in the first half of this year. Following an operating loss of 112.6 billion KRW last year, the company recorded an additional operating loss of 59.6 billion KRW in the first half of this year. As of the end of June, the company's total capital was negative 72 billion KRW, leaving it in a state of complete capital impairment.
At this rate, it is realistically difficult for Sambu Construction to survive without external help. However, its parent company, DYD, has drawn a line. When Sambu Construction applied for corporate rehabilitation in February, DYD stated, "We have completely exited the construction business, and therefore no accounting special relationship exists with Sambu Construction."
BizHankook reached out to Sambu Construction for a comment, but a company official simply replied, "There is currently no one in charge of media relations."