• As we wind down the earnings season, we want to highlight a company in Korea called SG&G (040610 KS) (market cap of 167 billion won, US$146 million). In every earnings season, there are some companies that generate signficant earnings growth that result in re-rating of their valuations. We believe that SG&G is one of those undiscovered stocks (no analyst covers SG&G right now) that could get re-rated and pop additional 30-50%+ from current levels over a one year period.  
• The company has dirt cheap valuations, trading at 0.3x P/B, 6.5x P/E (2016 earnings), and 2x EV/EBITDA (2016 EBITDA). Although SG&G is not that well known outside of Korea, the company has been one of the regular suppliers to GM (auto parts), as well as GAP and The Limited (apparel OEM). Plus, in 2014, the company moved most of its spinning/textile manufacturing operations from Korea to Vietnam and during this tranfer process, the company generated a lot of losses for its spinning/textile business. Its profitability has been improving since this transfer process.
• We think that the company could be valued at 0.5x P/B over the next one year, which would suggest implied share price that is 50% higher than current levels. (current price is 4,930 won)
• The company generated 1.2 trillion won in sales in 2016, up 31.4% YoY. Its operating profit was 46.4 billion won in 2016, up 118.1% YoY. 

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