Harim Holdings shares more than double on key unit’s earnings outlook

Harim Holdings Co. logo [Courtesy of Harim Holdings]

Shares of Harim Holdings Co., one of the biggest agri-food companies in Korea, have more than doubled this year on expectations of earnings improvement at its key subsidiary and the country’s dominant bulk carrier Pan Ocean Co.

Harim Holdings closed at 17,120 won on Friday, up 0.29 percent and up 134 percent from the beginning of the year. This is a 174 percent increase from the low of 6,420 won recorded in October last year. The shares are up 0.3 percent as of 1:17 p.m. Monday.

Harim Holdings is the holding company of Harim Group, with core subsidiaries including Pan Ocean, Harim Co., Jeil Feed Co., Sunjin Co., Farmsco Co., and NS Shopping. There are concerns that the holding company’s shares have risen more than its major subsidiaries. Shares of Pan Ocean and Harim, a manufacturer and distributor of poultry products, rose 9 percent and 22 percent, respectively, during the same period.

Harim Holdings shares have been designated as an overheated short-selling stock seven times this year by the Korea Exchange, a move when a stock whose portion of short-selling tops 30 percent of daily turnover or short-selling transaction volume doubles.

Of the group’s key subsidiaries, Pan Ocean, Harim, Sunjin and Farmsco are listed. Pan Ocean, in which Harim Holdings owns a 54.7 percent stake, is the most critical to the group‘s performance as the subsidiary accounts for the highest proportion of its sales. Based on sales at the end of last year, the marine transportation and grain distribution business, led by Pan Ocean, accounted for nearly half of its sales, or 43 percent, with the chicken and pork business accounting for 29 percent, feed 21 percent and distribution through NS Shopping Co. 4 percent.

Pan Ocean Co. logo [Courtesy of Pan Ocean]

The securities industry expects Pan Ocean’s performance to hit bottom in the first quarter and improve from the second quarter as the Baltic Dry Index, which tracks the commodities shipping freight-cost on the London-based Baltic Exchange, is expected to rise. Bulk cargo accounts for 70 percent of sales at Pan Ocean. A bulk carrier or bulker is a merchant ship designed to transport unpackaged bulk cargo, such as steel, coal and grain.

According to Korean stock tracker FnGuide Inc., more than three securities firms expect Pan Ocean‘s first-quarter sales and operating profit this year to reach 1.21 trillion won ($922.3 million) and 115.7 billion won, respectively, down 16 percent and 32 percent year-on-year. However, the company’s profit is expected to increase from the second quarter.

“The Baltic Dry Index fell to 530 in mid-February, but it is rising to 1,560 in April,” said Yang Ji-hwan, an analyst at Daishin Securities Co. “We expect the index to rise to about 2,500 by the middle of next month.”

Harim Holdings saw a major change in its governance structure last year. It acquired the remaining 18.3 percent stake in NS Shopping, which operates an agricultural and fisheries home shopping mall, making it a wholly owned subsidiary. Since then, NS Shopping went through a spin-off and Harim Industrial Co., in which Harim Holdings had indirect holdings, became a subsidiary. Harim Industrial is mainly engaged in the real estate development business.

An analyst at IBK Investment & Securities Co. said that Harim Industrial, which owns the site of Korea Freight Terminal in Yangjae-dong in southern Seoul, is expected to serve as a new growth engine for Harim Holdings as the holding company controls the company directly and is expected to accelerate its business.

Meanwhile, the value of stocks owned by Chairman Kim Hong-kuk, who owns a 21 percent stake in the holding company, increased significantly due to the sharp rise in the holding company’s stock. The value of Kim’s equity also increased by 117 percent in three months to 383.2 billion won at the end of March from 176.5 billion won at the beginning of this year.