Korea’s Hidden Value: Activism, AI & Golfzon | Ryan Albert

Ryan Albert · Terton CapitalBullish

Golfzon trades far below asset value; controller's 6,700-won tender offer undervalues the shares.

Golfzon's most valuable asset is a minority stake in Golfzon County, Korea's largest golf course operator, which is 68% owned by a large Korean private equity fund and is being sold. Its 32% stake alone was worth more than Golfzon's market cap, before golf courses, real estate and other stakes. The stock traded at 0.15 to 0.2 times book value. Controlling holders, owning about 60% excluding treasury shares, launched a tender offer at a 50-plus percent premium to a depressed price, but at 0.35 times book value (6,700 won). He views that as unfair: a business bought at 0.3 to 0.5 times book is worth roughly book once owned, and the holding company's balance sheet understated the golf course stake. He wrote open letters citing Ministry of Justice guidelines (special committee, external fairness opinion, fuller disclosure) and the fiduciary duty owed to all shareholders. The board delayed disclosing its opinion and gave no fairness view while recommending the offer. The first tender reached about 85%, short of the 90% needed to delist. A second tender at the same price drew zero shares tendered after the Capital Markets Act amendment raised the bar for listed-affiliate deals. The controller then said it would pursue enhancing value instead of delisting, and the share price now sits above the tender price.

“I felt that value was at least 30,000 Korean won per share. The tender offer price was at 6,700.”at 17:25

Ryan Albert · Terton Capital

Korea discount reflects minority treatment under family control; governance reforms now enacted are closing it.

The Korea discount is the price of being a minority shareholder in family-controlled companies, which set the rules. Controlling families want cash kept inside the company (cross-shareholdings, undistributed treasury shares, real estate) and a low share price, because inheritance tax is based on the share price around a gift and can reach about 60% including a control premium, so there is no incentive to raise the price. Retail investors in Korea have grown to roughly 15 million from about 5 million pre-pandemic, making them a political bloc. Japan's 2013 governance reforms doubled its topix-style index while Korea's stayed flat, showing what reform can do. Under a new president with a legislative majority, the government has moved in about 1.5 years through the Commercial Act amendment (directors owe duties to shareholders), the Capital Markets Act amendment (fair value standard for listed-affiliate mergers and appraisal rights) and Ministry of Justice guidelines, to get households to invest in stocks rather than real estate. The reforms are compressed compared with Japan's decade-long timeline. He notes none have yet been tested in court, so enforcement remains unproven.

“the discount simply put is just the price of being a minority partner to family controlled companies, and they dictate how the rules are set.”at 8:25

Ryan Albert · Terton Capital

Korean FMCG companies look cheap versus Western peers, with growing K-wave demand and hard non-operating assets.

He sees many Korean FMCG companies trading at quite cheap valuations relative to Western peers. K-wave (Korean pop culture and brand) demand is growing worldwide, and these firms are posting strong numbers. Many also hold substantial hard non-operating assets. On ROE, core operating businesses of some FMCG names earn low-to-mid teens and even high-teens returns. Including non-core assets such as cash, stakes in other businesses and real estate, reported ROEs fall to about 5 to 10 percent, so the hidden value sits in the underlying operations. He presents this from his own research and experience, not a data set, and says he will not name names for compliance reasons.

“there's a lot of FMCG companies that I think trade at valuations that are quite cheap versus what they are in Western markets”at 28:43

Jake Taylor · Farnam Street Investments / The Acquirers Podcast

South Korea's cheapest quintile is cheaper than Japan's on book, earnings and free cash flow yield.

Citing Verdad research, he compares the cheapest valuation quintile in each market. South Korea trades at 0.65 times price to book versus 0.88 for Japan, 8 times earnings versus 12 for Japan, and an 11.3% free cash flow yield versus 6.6% for Japan. He concludes Korea is cheap, the general takeaway from the data.

“price to book of point six five versus Japan right now at 0.88. ... Price to earnings of eight times versus 12 for Japan.”at 29:23

Ryan Albert · Terton Capital

Korea offers unmatched depth and very cheap valuations, with many stocks at low PEs or discounts to NAV.

Ryan says Korea is the only market with the depth of almost 3,000 listed companies, and many trade at low-to-mid single-digit P/E or at discounts to NAV of about three-quarters. He adds that government reform is pushing open a door that value investors can walk through, so Korea is his main focus despite other markets.

“I personally think that there's no other market in the world with the depth of almost 3,000 listed companies and so many of them trading at basically valuations where they're low mid single digits PE or sometimes discounts to NAV of three quarters”at 44:10

Ryan Albert · Terton Capital

Western governance is stalling or going backwards, while emerging markets with low governance bases should improve.

Ryan says governance in many countries, and at least in Western markets, seems to be stalling or going backwards. He argues that markets starting from a low governance base, competing for global investment dollars, will improve. He ties this to a mean-reversion view: Korea is at the bottom of its cycle and the US may be near the top of a different one.

“it does seem like in many countries or at least in the western markets, governance is stalling or even going backwards.”at 48:14

Ryan Albert · Terton Capital

Korea's holding-company structures are the most problematic and will see cleanup as investors push for change.

Ryan argues that the holding-company structure lets a family control grandchild companies with very little ownership at the HoldCo level. He says this makes change very hard. Some rules are already targeting it, and investors are starting to target these businesses. He sees the most interesting setups where structure and governance issues can be fixed, including overcapitalized balance sheets and board dynamics.

“But now with the HoldCo[-OpCo] structures, those I think are the most problematic, and that's where you'll see a lot of cleanup happening”at 54:07

Ryan Albert · Terton Capital

Korea's mandatory tender offer bill has good intent but flawed sequencing, so it was scrapped.

Ryan says the mandatory tender offer bill was meant to stop controlling shareholders from selling control at a premium and then squeezing out minorities. Local funds objected because the original sequencing let the controller sell its block first and only tendered for the shortfall. Ryan says the bill has been scrapped to his knowledge. He argues the direction is right but a pro rata structure from the start, with all investors participating, would fix the problem.

“I think the direction of it's good, but I think the sequencing of it should be pro rata from the get go.”at 57:11

Ryan Albert · Terton Capital

Korea's bear hug disclosure bill will likely pass by year-end, pressuring boards on undervalued firms.

Ryan says the bear hug bill has not passed but is probably likely by year-end. Boards would have to publicly disclose acquisition proposals, the terms, and their reasons for rejecting them. Ryan argues this helps where a company trades at a steep discount to asset value. It gives bidders a reason to come in and forces boards to either justify rejection or lift the share price, which he sees as a way to combat price suppression.

“It still hasn't passed, but it's probably likely by year end.”at 58:30

Ryan Albert · Terton Capital

Korea's governance reforms face bear risk from delayed precedent and impatient foreign investors.

Ryan's main bear case is that there is no legal precedent yet. He says it will take time to establish, and foreign investors may give up before it happens. He expects many changes in 2027 but notes they could slip to 2028. He also points to the market's concentration in two very large companies, which are good businesses but inherently cyclical. He thinks the reform is credible, but its timing and the market's impatience are the main risks.

“So it will take a while for precedence to happen and maybe foreign investors give up or get tired of all this before the precedence actually come into effect.”at 1:02:56

Ryan Albert · Terton Capital

Korea's governance reform is credible and early, so it should be hard to reverse soon.

Ryan argues Korea is at the bottom of a governance cycle and reforms are real. He cites a cumulative voting rule that lets small holders concentrate votes, a 3% cap on controlling-shareholder voting power for audit committee elections, and a dividend tax change that now encourages higher payouts. He says the reform has strong political backing and is still early compared with Japan, which has case law, a working market for control, and TSE cost-of-capital disclosure. He expects a slow, durable change rather than a quick reversal.

“I do think it's almost like going from horse carriage to cars. You don't really go backwards very quickly on these governance reforms”at 1:03:50

Ryan Albert · Terton Capital

Korea's expected MSCI upgrade to developed status is a short-term negative but a longer-term positive.

Ryan says Korea is still an emerging market under MSCI and is working to change that. He expects the decision to come around the middle of next year, with the change taking effect in 2028 or 2029. He says this could be a big positive, but he expects a short-term negative as Korea's market is absorbed into a larger developed-market index. He also notes that staying in the emerging-market bucket could help if developed markets sell off, given the heavy emerging-market flows into Taiwan and China.

“developed market status, if I'm not mistaken, middle of next year, so then it would come in effect 2028 or 2029. So if that happens, that could potentially be huge”at 1:04:55

Jake Taylor · Farnam Street Investments / The Acquirers Podcast

AI spending now dominates the US economy, starving other construction and sectors like a Dutch disease.

He uses the Dutch disease analogy: a booming sector lifts headline numbers while starving the rest of the economy. Amazon, Microsoft, Alphabet and Meta are set to spend roughly $750 billion to $1 trillion this year, mostly on data centers. Citing JPMorgan's Michael Cembalest, tech capital spending accounted for about 40% of US GDP growth through the first three quarters of last year, and 42 AI-related companies produced 66% of S&P 500 earnings growth and 78% of price return since ChatGPT launched. Real construction spending on data centers is up 64% year over year, while housing (down 10%), hospitals (down 10%), schools (down 13%) and non-data-center offices (down 14%) have all shrunk, the way Dutch manufacturing shrank after the gas discovery.

“It feels like to me and probably everyone else that that AI is this gravitational body in the American economy right now.”at 35:49

Jake Taylor · Farnam Street Investments / The Acquirers Podcast

Data-center spending appears to be crowding out other capex, leaving non-AI investment depressed.

Jake cites construction and capex data showing schools down 13%, offices excluding data centers down 14%, and factories down 24%. He argues the data-center boom is absorbing capital, so the rest of the economy is not forming new investment. He ties this to capital cycle theory, asking where new supply is slowing and which existing assets are getting harder to replace. He hedges the point, saying the data centers 'might be' crowding out other spending.

“it seems like the data centers might be crowding out all of this other CapEx spending.”at 37:11

Tobias Carlisle · Acquirers Funds / The Acquirers Podcast

US housing is still short of supply, with high prices but very low transaction volumes.

Tobias cites two charts. One shows annual new home building below what it should have been since 2016, so the US is still short of housing. The other shows many more sellers than buyers, and housing transactions back at GFC lows. Mortgage rates are back near long-run levels, so prices are high but volumes are low. He says this means the data should be taken with a grain of salt.

“Nothing's going through with long run mortgage rates back to, like, basically, close to the long run. So prices are high, but volumes are low.”at 40:40

Ryan Albert · Terton Capital

Korean speculative froth has eased after leveraged-product tests, though concentration in a few names remains.

Ryan says the speculative behavior that pushed the KOSPI from about 5,000 to 9,000 and back to about 5,000 has died down. He cites tests and income thresholds for leveraged products as a reason. The index has recovered to around 6,000. He notes that heavy concentration in a few companies means their moves still drive the whole market.

“yeah, I do think the speculative nature has died down versus what it was in the earlier part of the year.”at 43:25

Ryan Albert · Terton Capital

African growth is strong, but currency depreciation has eroded returns, and each country differs.

Ryan says growth in the African companies he looked at was extraordinary, but currency depreciation ate into returns. He argues Africa should not be treated as one market, since West, East, South Africa, and Botswana operate differently. He found companies accessible and open to talk, but growth slowed for multi-country firms because of red tape. He sees Africa as exciting but currently holds no African stocks.

“I mean, the growth is absolutely insane. At the same time, some of the currency depreciation ate into those returns.”at 46:31