Nearly 23 percent of South Korea’s listed companies with over one trillion won ($973.7 million) annual sales failed to earn enough from business operations to cover interest expense

23% of S. Korean firms with over $970mn revenue make profit short of interest expense

2014.05.07 14:55:49

Nearly 23 percent of South Korea’s listed companies with over one trillion won ($973.7 million) annual sales failed to earn enough from business operations to cover interest expense last year due to recession. 
Of 159 listed companies with more than one trillion won sales in fiscal year 2013, excluding financial firms, 36 or 22.6 percent had below one times interest earned (TIE), said Wednesday based on the analysis of their operating profit and interest expense.
TIE is calculated as operating profit divided by the total interest payable. A TIE under one means a company’s operating profit falls short of paying outstanding interests.
The portion of companies with less than one TIE among those earning over one trillion won sales increased to the highest in three years in 2013.
In 2011, the portion came to 17.8 percent, or 26 out of 146 corporations. The portion rose to 21.5 percent in 2012, or 34 out of 158.
Many of the corporations with negative TIE were in the air and marine transportation, shipbuilding and construction sectors, which have been in downturn since the global financial crisis.
These companies included builders such as Daewoo Engineering & Construction (E&C), Samsung Engineering, GS E&C and Hyundai Development Company, as well as listed units of STX Group such as STX, STX Heavy Industries and STX Offshore & Shipbuilding.
Listed corporations such as LG Electronics, Samsung SDI, Korean Airlines and Asiana Airlines also posted less than zero TIE.

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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