Korean boards burn their own shares as earnings diverge

Korean companies from gaming to retail, diagnostics and defence announced share buybacks and cancellations within days of each other this month, a run of capital returns that arrived alongside third-quarter results pointing in opposite directions.

Shift Up will cancel 320,000 common shares, worth 9.87 billion won ($7.28 million), with cancellation set for the 27th. The game developer behind "Goddess of Victory: Nikke" and "Stellar Blade" reported third-quarter revenue of 46.2 billion won ($34.1 million) and operating profit of 20.7 billion won ($15.3 million), but swung to a net loss of 25.5 billion won ($18.8 million) after 53.7 billion won ($39.6 million) of foreign-exchange valuation and translation losses. Revenue at Nikke fell 18.4 percent from the prior quarter and Stellar Blade sales dropped 32.9 percent. The move followed a September decision to terminate a trust agreement for acquiring treasury shares and convert those holdings into cancellation stock.

Shinsegae, the department store and duty-free operator, is cancelling 338,750 common shares, 3.6 percent of its 9.45 million shares outstanding, valued at 60.9 billion won ($44.9 million). That came with the retailer's largest-ever third-quarter operating profit, 164 billion won ($121 million), up 64.6 percent, on total sales of 2.9 trillion won ($2.14 billion). A company official attributed the result to competitiveness in the department store business and improved management at subsidiaries.

Kakao went the other way, announcing a 150 billion won ($111 million) on-market purchase of 5,154,639 shares from Nov. 6 to Feb. 5 next year, with cancellation to follow. Its third-quarter operating profit rose 7 percent to 240 billion won ($177 million) on revenue of 2.09 trillion won ($1.54 billion), but its AI services unit posted a 64 billion won ($47.2 million) operating loss, wider than the previous quarter's 57 billion won ($42 million). Kakao's plan includes a further 300 billion won ($221 million) of buybacks and cancellations sketched for after its corporate split, when its Kakao X unit would direct 30 percent of subsidiary dividends and investment gains to returns.

Netmarble is cancelling 1,817,270 shares worth 82.9 billion won ($61.1 million), to offset dilution from a share swap used to take 100 percent of Netmarble Neo. SD Biosensor will buy 1,954,888 shares for 13 billion won ($9.59 million) by Feb. 10, having reported a first-half net profit of 38.6 billion won ($28.5 million), its second consecutive quarterly profit.

Hanwha Aerospace stands apart from the cancellations: its 150 billion won ($110 million) purchase of 220,000 shares is for employee compensation, not capital return. It reported a third-quarter net loss of 36.7 billion won ($27.1 million) as Polish K9 deliveries and engine losses weighed on results. Hanwha expects Polish K9 and Chunmoo deliveries to improve results from the fourth quarter.

Studio Dragon raised third-quarter operating profit 44.4 percent to 15.1 billion won ($11.1 million) without announcing a buyback.

For outside shareholders, the number that matters is the cancellation rate. Shinsegae's 3.6 percent retires stock permanently; a purchase programme alone does not.

Shift Up has 214 billion won ($158 million) in cash and equivalents at the end of September, and its Nikke update topped app store revenue charts in Korea and Japan after its Oct. 29 anniversary.