Value context and insight. lkm@koreatimes.co.kr
Douzone Bizon shares unlikely to rebound on weak earnings, MSCI delisting risk
Douzone Bizon headquarters in Chuncheon, Gangwon Province Korea Times file
By Lee Kyung-min
Douzone ICT Group Chairman and Douzone Bizon CEO Kim Yong-woo
By Lee Kyung-min
Douzone Bizon, a local ICT solutions provider, will not be able to see its plummeting shares rebound any time soon, bogged down by weaker-than-expected earnings last year, compounded further by its highly probable delisting from the Morgan Stanley Capital International (MSCI) equity index scheduled for Thursday, according to market watchers Wednesday.
Securities companies say the earnings prospects for the firm's cloud services will dim further, unless it identifies a large growth opportunity to offset the steep loss of its revenue from hefty government contracts that ended in 2020.
Company CEO Kim Yong-woo has bought over 10.5 billion won ($8.7 million) worth of firm shares over the past two weeks. But the effort to reinvigorate investor sentiment seems to no avail, as evidenced by the shares hovering at 55,000 won, a figure hardly an improvement from the previous two-year low of 50,300 won, on Jan. 28.
Its share prices have been on a sharp downtrend since peaking at a high of 111,500 won last September. It had spiked to a high of 136,000 won in September 2020, upon the announcement of its addition to the list of key firms included in government-compiled stock indexes to be traded on the local stock exchange, as part of the Korean New Deal, a long-term growth strategy.
The firm, alongside corruption-tainted Shin Poong Pharm, is all but certain to be delisted from the MSCI equity index, as illustrated by both of their market caps staying under the “lower buffer” of the overall cutoff range of between 2.6 trillion won and 3 trillion won.
Shin Poong's market cap stood at 1.3 trillion won, and Douzone Bizon was at 1.61 trillion won, Wednesday, the lowest among Korean firms on the global index list.
Downward revision
Many local brokerages are rushing to revise down their share price outlooks for the ICT leader, which also specializes in enterprise resource planning (ERP), defined by simplified, fast business processes through a single integrated system.
Samsung Securities lowered its target stock price to 60,000 won, down 40 percent from 100,000 won, while Eugene Investment lowered its own to 78,000 won, down 25.7 percent from 105,000 won. Hanwha Investment & Securities lowered its target to 80,000 won.
Douzone's annual sales hit a record high of 318.7 billion won last year, but its operating profit slid to 71.1 billion won, down 7.2 percent from the previous year. Net income also fell to 54.4 billion won, down 6 percent from a year earlier.
Fourth-quarter registered sales of 84.8 billion won and operating profit of 16 billion won, respective year-on-year drops of 4.8 percent and 40 percent, far short of market consensus.
Samsung Securities senior analyst Oh Dong-hwan said a further revenue decline is inevitable, dampened by a rapid loss of existing customers and limited inflow of new customers.
“The firm will undertake some state-run projects this year, but the size of the contracts will be smaller, leading to an overall reduction in sales,” the analyst said. “More attention should be paid to whether and how further it will decline in value.”