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KESPION: Korea’s small cap electronics conundrum

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I’ve been talking to fund managers and investment journalists a lot about South Korea recently. At times Korea feels, from an investment perspective, that it gets overshadowed in the Asian stocks debate by China and Japan. But we all seem to agree, that outside the household names like Hyundai and LG Chem, there are a lot of very high quality companies trading in Korea.

The problem is, many are neglected by foreign investors, and when you start to look at the small cap sector, even by Korean investors. Is small really beautiful in Korea, one asks?

KESPION: small cap Korean electronics specialist

KESPION [KOSDAQ:079190] looks like one of the highest quality small cap plays in the Asian market at the moment. It produces and sells mobile antennas, smart grid solutions and wireless security systems. It is involved in the lucrative zinc air battery market, including the expanding military use zinc air battery segment.

The share price, while not awful in terms of performance, has not been great. We saw a big rally in the shares up to about 1250 won last year, but shares have come off considerably since then.

Yet KESPION’s metrics overall look excellent. It is one of those small caps that has given up a lot of share price territory since it came on the market, but could also represent an excellent turnaround story, especially if a family office or fund manager became actively involved in the company.

Niche electronics IP

KESPION is a niche electronics provider which does some of its manufacturing outside Korea, but trades off the strength of its core IP. This includes a couple of flagship products. Video Bridge is a wireless IP video surveillance system that can connect digital devices using Korea’s CDMA technology. This includes free exchange of video.

KESPION’s Antenna product is a cutting-edge wireless mobile communications platform which is still under development, while Claro, which feels like a bit of a departure for the company, is a world first air steriliser using platinum catalytic technology.


The latest set of numbers we have from KESPION show that the company is doing all the right things: the balance sheet looks great for an IT company of this size; cash and cash equivalents have also improved markedly. We do note that the company has been taking on debt, which may be one of the reasons the shares have sold off since last year. As ever with a story like this, more could be done on the IR front as well, even in Korea.

KESPION’s income statement and its EBITDA have picked up considerably in 2023, although the company does need to do more about its revenue efficiency.

What we have here is a conservatively managed Korean small cap electronics specialist, which owns some good IP, but is not getting enough love from Korean investors at the moment, I suspect more could be done in terms of sales and distribution of some of its core products, including overseas partnerships. We continue to see volume in the stock from Korean brokerages, so the interest is there locally.

Perhaps KESPION needs a venturesome Asian fund manager to take a piece of the action and help to turn its investment fortunes around? I see no reason why it can’t get back to the levels of 1500 won or higher. Worth a look if you are a venturesome investor in East Asian small caps.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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