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Dongwon Stock Showing Recovery After 35% Fall

Dongwon Industries Co. Ltd. closed today with a share price of 306,500 Korean Won showing a significant dip from values earlier this year, but still marking some recovery.  As one of the world’s largest tuna catching companies, Dongwon has a fleet of 36 vessels and is the parent company of StarKist tuna brand, one of the United States big three in canned tuna, and market leader in the light meat tuna segment. 

Source: Bloomberg…currency in South Korean Wons (KRW) (1 KRW = USD 0.00069)

While Monday’s closing share cost only meant a 3.6 percent gain on Dongwon’s 2013 opening value of KRW 288,000 this year so far the peak lay at KRW 407,000. Considering its highest level in May, recent weak stock market performance is disappointing for shareholders, who saw almost 35% being shaved off their stock.

The current lower share values were similarly displayed in Dongwon’s stock market performance during the beginning of this year. Speculation emerged in mid-March surrounding alleged illegal fishing activities by a Dongwon owned tuna seiner. Only a modest fall in share cost occurred on the heel of these reports, showing markets gave little significance to these publications, and market dynamics continued at a passive level.

Strongly increased trading activity around the 25th of April with 50,000 shares changing hands, caused the stock to rocket within a week of trading by almost 28% from 317,000 to 407,000.

Listed on the Korean Stock Exchange, Dongwon continued struggling with the IUU allegations of their tuna fleet in Liberian waters.  On April 29, it was reported that Dongwon Industries confirmed paying a penalty of USD 2 million to the Liberian government for illegal tuna fishing activities by its purse seiners in African waters.  Surprisingly a few days later, on May 5th, the stock opened at a 407,000 record but started a swift 2 week decline and losing again 15% of its rate. 

Since mid May till early September, the trend of the stock of Dongwon and Thai Union Frozen (TUF: TB) showed a strong resemblance, each losing almost 30% in value. September 9th marked a drop in price for Dongwon at 275,000 KRW, only days after Thai Union’s stock fell from 53.25 BHT to 44. Dongwon is with its StarKist brand competing in the US market directly with Thai Union’s Chicken of the Sea. The Korean stock has since remained at a low level, and in October fell back to 269,500 just above the year’s lowest quoted level of 268,000 of mid Feb, having lost all its gains of early May.

The International Seafood Sustainability Foundation (ISSF) confirmed in October that it would have a final resolution on the IUU issue by the end of this year. Dongwon is listed as an ISSF member through its US StarKist tuna brand, an industry body claiming to work to ensure high standard of sustainable and ethical practice. Following the accusations, ISSF had earlier committed to undertake an investigation into the matter.

Dongwon Industries currently has 3.4 million outstanding shares that have been authorized, issued and purchased by investors, daily trading volume hardly ever exceeds a level of 50,000. Last year saw Dongwon record annual gross profit of USD 231.1 million, up from USD 192.9 million in 2011. Lately the stock is showing some recovery again, being up since October 11th by 14%, following again a similar trend as Thai Union, its US competitor.