Could KT get reevaluated?
By Baek Byung-yeul
KT has been regarded as a “boring stock” in the stock market due to its stable outlook, good dividends and low volatility, but investors are paying growing attention to the telecommunications company as the company's lackluster portfolio is starting to look more interesting.
On Feb. 16, the share price of KT increased by 7.4 percent to close at 26,550 won ($24.01), reaching its highest point in 52 weeks. KT has outperformed its competitors as its stock price increased by 10.4 percent this year alone, while SK Telecom and LG Uplus saw their stock prices up by 5.9 percent and 6.8 percent, respectively.
KT continued its outperforming streak on Wednesday as its stock price closed at 26,650 won, while the benchmark KOSPI index ended down 29.52 points, or 0.93 percent, at 3,133.73.
Among the reasons why KT's stock has abruptly become attractive, industry analysts said the main reason was the much-increased dividends. During a recent conference call with investors, the company announced its dividends per share in 2020 will be 1,350 won ($1.22), up 250 won from a year earlier.
Hana Financial Investment analyst Kim Hong-sik announced a report recommending a buy on the company as the telecom is expected to offer higher dividends and its average revenue per user will also be greatly increased this year with more customers using 5G networks, which will enable the firm to boost its profit margin via a higher pricing plan.
“In 2020, KT increased its dividends per share by 22 percent year-on-year, which is much higher than market expectations. The move will entail a sharp rally in a short period of time,” the analyst noted, suggesting a target price of 35,000 won per share.
Other than the improved dividends, KT said its effort to restructure its business portfolio has also drawn investors' attention.
Since he was appointed to head the telecom giant in 2020, the company's CEO Ku Hyeon-mo has emphasized that the company will work on fostering new growth engines such as businesses based on emerging technologies ― artificial intelligence (AI), cloud computing, big data, media content and 5G.
Ku has put importance on core strengths and lightness to help KT improve transparency and boost corporate sustainability in the medium to long term. Under his guidance, KT has been on track to unload non-core assets and retire unprofitable businesses rather than seeking bulky external growth.
“Under the CEO, KT has focused on boosting corporate value doing more high-potential businesses,” a company official said.
“Excluding its affiliates, the sales of KT itself surpassed the 15 trillion won mark for the first time in nine years, which represents a healthy fundamental of the company. Also, the company's AI/DX unit that supervises AI and digital transformation businesses has shown double-digit growth.”
KT's success in new businesses remains to be seen. The company set up the new unit KT Studio Genie recently in an effort to beef up its media platform. It said KT Studio Genie will supervise production and distribution of media content developed using its intellectual property.