Categories: Wire Stories

Flashlight Capital Reinforces the Need to Overhaul KT&G�s Governance and Capital Management Following the Company�s Poorly Received Investor Presentation

SINGAPORE–(BUSINESS WIRE)–Flashlight Capital Partners Pte. Ltd (�Flashlight Capital” or “we”), a meaningful shareholder of KT&G Corporation (KRX: 033780) (“KT&G” or the “Company”), today issued the below statement in response to the investor presentation issued by the Company on January 26, 2023.

As a reminder, Flashlight Capital submitted shareholder proposals to KT&G on January 19, 2023. The proposals include the election of two highly respected Korean business leaders as independent directors to the Company’s Board of Directors (the “Board”) at the Company’s 2023 Annual General Meeting of Shareholders (the “General Meeting”).

Sanghyun Lee, Managing Partner of Flashlight Capital, commented:

“KT&G’s investor presentation, which resulted in an immediate share price decline of nearly 5%, fails to address the most pressing concerns for shareholders and only reinforces the need for Flashlight Capital’s proposed solutions. The Company’s aggressive capital expenditure plans, refusal to revise its shareholder return policy before 2024 and hasty dismissal of a potential spin-off of Korea Ginseng Company (‘KGC’) all highlight the lack of responsiveness to shareholders. In addition, the Company’s response suggests a disregard for transparency, poor capital management and deficient governance – all of which we are seeking to rectify at this year’s General Meeting with our shareholder proposals.

KT&G’s Board, which claims to be ‘independent’ from management, has refused to engage with us for months, while blindly supporting leadership’s imprudent and ill-conceived expansion plans without disclosing any targets for profitability, cash flow or return on capital. The Company announced it would leave its shareholder return policy unchanged until 2024, ‘monitoring cash flow and share price levels.’1 ‘Increased’ shareholder returns are not quantified and now become subject to cash flow that will, in our opinion, be jeopardized in the wake of plans to quadruple spending on investments.

Equally concerning, the Company appears to have unanimously dismissed shareholders’ calls to explore a spin-off of KGC. The Company based this decision on questionable assumptions, including the potential for the new company to trade at a valuation of 6x EBITDA (despite global health food peers trading at significantly higher valuations), unquantified dis-synergies from a separation and the risk that (in an unprecedented result) the spin-off would somehow not qualify for tax-free treatment.

KT&G’s Board and management team appear more interested in empire building than running an efficient and competitive business that supports the creation of enduring shareholder and stakeholder value. Despite recent share price appreciation and significant cash accumulation, the stock is trading at the same price it was 15 years ago at a steep discount to its peers. Flashlight Capital is proposing eight steps that can immediately improve governance, capital management and unlock long-term value to reverse the destruction of the ‘lost 15 years’ beginning at this year’s General Meeting. In the coming weeks, we plan to issue a public presentation to provide KT&G stakeholders with a clear sense of our proposals’ rationale and intended impact to improve transparency and oversight at KT&G.”

About Flashlight Capital

Flashlight Capital Partners Pte. Ltd is an investment management firm founded by Carlyle Group’s former Head of Korea, Sanghyun Lee. Based in Singapore, Flashlight Capital’s investment philosophy is grounded in improving corporate governance and unlocking long-term value at its portfolio companies. For more information about Flashlight Capital, please visit www.FlashlightCap.com.

1 KT&G Investor Day Presentation, Slide 24, January 26, 2023 (https://en.ktng.com/IrEvent?cmsCd=CM0068).

Contacts

For Investors

Flashlight Capital Partners

contact@flashlightcap.com

or

For Institutional Investors

Georgeson

Savoy Lee

asia.engagement@georgeson.com

For Korean Media

Strategy Salad

Louis Kim

jhkim@strategysalad.com

For U.S. Media

Longacre Square Partners

Greg Marose / Charlotte Kiaie

flashlightcapital@longacresquare.com

Alex

Recent Posts

Oodles Smart Awarded Bronze Award In “Hong Kong ICT Awards 2024: Smart Living (Smart Home) Award”

HONG KONG SAR - Media OutReach Newswire - 22 November 2024 - As a leading…

15 mins ago

Oodles Smart Awarded Bronze Award In “Hong Kong ICT Awards 2024: Smart Living (Smart Home) Award”

HONG KONG SAR - Media OutReach Newswire - 22 November 2024 - As a leading…

15 mins ago

Minsuzenraku Opens First Hong Kong Location, Bringing Taiwan’s Popular No-Menu Teppanyaki Experience

HONG KONG SAR - Media OutReach Newswire - 22 November 2024 - Minsuzenraku, Taiwan's highly…

2 hours ago

New Directions East Asia 2024: Exploring the Transformative Role of Language Assessment on Education and Society

Bringing together UK and global expertise, the 12th edition of the global language testing and…

3 hours ago

Wine Connection’s Annual Wine Tasting Fair 2024: Discover Your Next Favourite

SINGAPORE - Media OutReach Newswire - 22 November 2024 - Wine enthusiasts in Singapore can…

4 hours ago

Get Wild about the Festive Season with ChristmasVille Furry Monsters Unleash Holiday Fun at Pacific Place and Starstreet Precinct

HONG KONG SAR - Media OutReach Newswire - 22 November 2024 - The spirit of…

4 hours ago