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Buy: Daewoo International
Daewoo International, one of the big trading and resource development companies in Korea, is gaining investor confidence as its operating profit for the first quarter is expected to exceed the previous projections by analysts, says Korea Investment & Securities.
The brokerage firm formerly expected a profit of 4.75 trillion won, but reports say that the Daewoo already made 4 trillion won in January and February, so it would be much higher for the whole quarter.
Korea Investment & Securities also points out that the global steel price is critical to the future revenue of Daewoo. Daewoo is the biggest buyer of POSCO’s steel. It buys steel from POSCO and sells it to other countries. If POSCO raises its wholesale steel price, than Daewoo can raise its retail price accordingly.
In the long term, the report says that investors should watch closely to the mining shares Daewoo has obtained around the world. The trading company owns a 4-percent share of $5.3 billion Ambatovy nickel project in Madagascar, which begins its initial production in the second half of the year. The company also has a 5-percent stake in Narrabri coal mine in Australia. It has the exclusive right to sell a quarter of the entire coal mined in Narrabri, which will further boost company’s profit. The production is scheduled to start later this year.
Neutral: KEPCO
Korea Electric Power Corporation (KEPCO), Korea's sole electric power service provider, is not very attractive due to the high domestic inflation and soaring overseas oil prices, says Dongbu Securities.
Its operating deficit for the first quarter was reduced from last year, but it cannot turn to profit because the power company can’t afford to reflect the hike in oil prices to its electricity rate. The government won’t let this happen because of high inflation, the report says.
This means even if KEPCO’s sales go up, it is not likely to make profit.
One reason that investors can remain positive about KEPCO is that its financial structure, especially the debt ratio, is relatively sound compared to other state-owned companies. Also, there is a possibility of change in government policies on electricity prices.
Sell: LSIS
Woori Investment & Securities removed LS Industrial Systems (LSIS), one of the biggest beneficiaries of the blast in the Japanese nuclear power plant, from its recommendation list.
The producer of industrial electronic machinery and related systems recently displayed 26 items including green business solutions in Hanover. LSIS’ eco-friendly machineries such as solar inverter and “smart grid” equipment have attracted many foreign investors who bought more than 160,000 shares of the company this month.
However, the stock price of LSIS fell more than three percent on Friday. The report says investors were worried that the firm’s stock price had risen too much since the earthquake in Japan. The stock has jumped 14.57 percent last month, as the nuclear blast in Japan gave light to LSIS’ green energy solutions.
Another blow to the firm’s stock price is a rumor that it will be prohibited from biddings for KEPCO projects. Reports said that LSIS has violated certain terms of their previous contract, so KEPCO will not allow it to participate in its projects for the next 6 months. But LSIS is refuting such claims
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