Stock picks: buy CJ O Shopping, sell Asiana
CJ O Shopping is a cable and Internet shopping network. It has successfully launched a cable channel in Vietnam in July and its Chinese business is also prospering, said Korea Investment & Securities. Considering its growth potential, the brokerage believes the retail company is worth 350,000 won per share. Friday’s closing price was 282,500 won.
It is the only major retail company in Korea that keeps growing in overseas markets, the report said. Sales volume in Korea is also expected to grow by 25 percent this year and the operating profit by around 15 percent, it said.
CJ O Shopping is a subsidiary of CJ Group. It was formerly called CJ Home Shopping but the name was changed in 2009. The “O” represents many things, such as “okay,” “online,” “on-air,” “optimum,” and “omnipresent,” according to the company.
POSCO started the construction of an integrated steel mill in Indonesia in a joint venture with Krakatau, a local steel maker. Production will begin in 2014 and the firm hopes to reach the breakeven point before 2016.
Daewoo Securities said that the Indonesia venture is especially attractive because of a five-year corporate tax exemption, which was given because Krakatau is a government entity.
There’s already a shortage of steel supply in Indonesia. Domestic producers meet only 3.7 million out of 8.5 million tons required in the country and the demand is expected to increase as the manufacturing industry starts to burgeon. Daewoo’s analysts say that Indonesia’s population of 230 million will provide cheap labor and facilitate the growth of the industry.
Another advantage of producing steel in Indonesia is that it is abundant with raw materials — iron ore and high-quality coal. In steel production, raw material accounts for 70 percent of the total cost, Daewoo says. About 30 to 40 percent of the ore and 100 percent of coal will be supplied from local mines.
Target price is 610,000 won. Friday’s closing price was 463,000 won.
Sell: Asiana Airlines
Shares of Asiana Airlines fell by 7.8 percent since Thursday morning when one of its cargo planes crashed into the sea near Jeju Island. So there was no surprise when Korea Investment & Securities withdrew its buy recommendation on the nation’s second largest airline, citing “risk management.”
Asiana has 10 cargo planes, including the one lost on Thursday. Combined, the fleet made up 26 percent of the firm’s revenue last year, which means that the loss of the plane could lead to around 2 or 3 percent loss in revenue.
In addition, the lost plane and cargos would cost them around 200 billion won in asset value, which amounts to 3.4 percent of its total asset. Of course, much of the damage would be covered by insurance but the real impact of the incident is still unclear. The firm only identified that there was fire in the plane’s cargo section so further investigations will decide how much insurance premium it will have to pay in the future for every flight.
The last time one of Asiana’s planes crashed was 1993 when 68 people died on a mountain near Mokpo.
Compiled by Cho Jin-seo and Lee Sun-kyo