Korea: Debate heats up over Internet shares: Think tank says Kosdaq-listed firms' share prices are excessively overvalued

Amid heated debate over "Internet bubbles," a leading private think tank yesterday warned that the Kosdaq-listed Internet-business companies' share prices were excessively overvalued.

The Hyundai Research Institute said in a report that the market capitalization of 10 leading online (Internet) companies listed on the Kosdaq is worth 75.1 times their combined sales last year, far above the Nasdaq's corresponding figure of 59.6-fold.

In contrast, stock-market values of offline (manufacturing) companies listed on the Korea Stock Exchange were found to stand at 0.7 times their annual turnovers in 1999. "Excessive overvaluation of Internet venture businesses and excessive undervaluation of the manufacturing firms suggest the domestic stock markets are not functioning normally," the institute report said.

Contradicting the Hyundai report, however, Chon Ha-jin, president of Haansoft, said later in the day that there are no bubbles in the share prices and popularity of Internet-based companies.

"Growing popularity of leading Internet service providers with a respective subscription base of over 1 million cannot be seen as a froth," Chon said, likening up-and-coming venture firms to popular entertainers. He then suggested that strategic alliance between online and offline companies, rather than direct competition, will be the best way for mutual survival.

Meanwhile, in a sobering forecast, president of Daum Communication Lee Jae-woong recently forecast that half of the Internet companies will soon be driven out of the market for lack of competitiveness.

According to the Hyundai report, Daum Communication led other online companies with market capitalization exceeding sales 371-fold, followed by Serome Technology (106 fold), Haansoft (74.9 fold), Hanaro Telecom (56.2 fold) and Handisoft (49.2 fold). For Nasdaq online companies, the comparable figures were low - 236.6 fold for Price Line, 157.9 for Yahoo!, 114.4 for CMGI and 5.1 to 27.9 for other online companies.

On the other hand, most offline firms listed on the KSE are undervalued, with market capitalization of Samsung Electronics only 1.7 times the amount of its sales in 1998, followed by Korea Electric Power Corp. with 1.5, Pohang Iron and Steel with 1.2 and Hyundai Engineering & Construction with 0.2.

Updated: 03/11/2000 by Yoo Cheong-mo Staff reporter

http://www.koreaherald.co.kr/news/2000/03/__05/20000311_0541.htm

-- Carl Jenkins (Somewherepress@aol.com), March 10, 2000