Lube Stocks Regain Shine in South Korea


SEOUL – Operating performances of South Korean lubricant businesses have improved lately,and as a result they are regaining their luster in stock listings.

Lubricant stocksare considered the bluest blue chips in stock streets here, prized for their stable profits, high-paying dividendsand steadilygrowing share prices. They have a place in every portfolio.

Hankook Shell Oil, a Royal Dutch Shell affiliate that manufactures and markets lubricants and grease, is the mostfavorite buy-and-hold stock that pays a reliable income. It has given out the highest dividend this year – 18,000 won (U.S. $17.52) per share – beating Samsung Electronics 13,800 won per share,Korea Securities Depository announced.

Park Byeongku, the co-chief executive officer ofMobil Korea Lube Oil, received a bonus of 11.89 billion wonindividends in 2013. According to South Koreas financial market watchdog, the Financial Supervisory Service, Park ranked sixth on the list oftopdividend recipientsamong stockholders of unlisted companies.

Other lubricant stocks such as Michang Oil Industry and Kukdong Oil & Chemicals are also preferred holdings among conservative investors. But these lubestocks have lowturnover, and share prices are fairlyhigh. Thus investors are always on thelookout for other lube shares going public. Currently many have their eyes on SK Lubricants.

SK Lubricants main productsare API Group III base oil and finished lubricants. The companys Zic brand is number one in South Koreas finished lubricant market. SK Lubricants is a cash cow subsidiary of SK Innovation. SK Lubricants logged 155.1 billion won in operating profit in 2013 while its holding company, SK Innovations petroleum segment, earned 60.8 billion won.

SK Lubricants was the lubricants segment of SK Energy until 2009, when it was spun off into separate company. As it is a captive spin-off – not an equity spin-off – SK Lubricants has attempted initial public stock offerings in 2013 and 2012. The share sale plan has beenwithdrawn due to a prolonged bear market and deteriorated operating performances.

But its operating performance has improved sharply this year, and stock investors are watching the lubricant shares again. Asked about plans for a stock listing, SK Innovation spokesman Jeong Yongjun told Lube Report Asia, It’s true that the lubricant market is showing obvious signs of recovery. We are closely watching the situation. But we cannot tell the timetable or any detailed plan as of now.

Hyundai Oilbank, which entered the lubricant business in 2013,is also weighing the timing of an initial public offering. The company also tried listing onthe stock market in 2011. Stock analysts have predicted that an IPO by Hyundai Oilbank would raise between 4 trillion and 7 trillion won. An SK Lubricants offering is expected to collect 4 trillion to 5 trillion won.

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