 Ahn Cheol-soo, a doctor-turned-computer entrepreneur, sees his anti-virus software maker AhnLab’s stock price rising in leaps and bounds, ironically reflecting his meteroric rise in the political arena and fueling speculation that he will run for president in December. / Korea Times file |
AhnLab, the country’s leading anti-virus software company, is soaring in the stock market as its major shareholder Ahn Cheol-soo emerges as the strongest potential presidential candidate. Analysts agree that the price has reached an irrational level but isn’t likely to fall in the immediate future.
AhnLab closed at 159,900 won per share Wednesday, with its price earnings ratio (PER), or the price of the share divided by the per share earnings, standing at 110. A PER of above 100 is quite unusual, according to analysts. The PER of software companies usually stands between 15 and 20.
Signs of irrationality
Kang Lok-hee, an analyst at Daishin Securities, said the price is unreasonable.
“For one thing, AhnLab has a total of around 10 million shares issued, and 4.3 million shares were traded Tuesday. It means 43 percent of the shares were traded on a single day. On Dec. 1 last year, 71.6 percent of its shares were traded.”
It means small-sum investors are engaged in day trading, seeking short-term profit. “Foreign investors have only 1.5 percent and institutional investors aren’t trading it either,” he added.
Kang said that the outlook on the Internet security industry is rosy. “Demand for Internet security services has soared among financial businesses following the hacking of Nonghyup and Hyundai Capital last year, and the private information protection act, which strengthens businesses’ protection of private information, is adding to the demand. I think AhnLab has no reason to be concerned over its performance for the next two years.”
Even so, the current price is irrational, according to Kang.
“Even when applying the PER of the upper band at 25, the stock price should be around 50,000 won. I think the appropriate price for the stock is between 45,000 and 50,000 won.”
Overshooting to continue
Behind the irrational surge is politics. Ahn, who is currently dean of Seoul National University’s Graduate School of Convergence Science and Technology, is considered one of the strongest potential presidential candidates. He has been leading polls since last fall when he supported Park Won-soon, a leading NGO activist, in the Seoul mayoral election.
Kang said that the irrational price isn’t likely to return to the normal level anytime soon. “If Ahn announces that he won’t run for president, the stock price will plummet in one week. But it doesn’t seem he will.” Ahn has neither denied nor confirmed that he will run for office.
The analyst expects the stock to continue rising, though with drastic fluctuations, until the presidential election in December. “It will rise to the ceiling when Ahn tops polls and will plummet to the bottom when his popularity falls. It will continue fluctuating according to the news.”
What if Ahn becomes president? The analyst expects everybody to calm down then, with the stock price returning to the fundamental level immediately. “Even if he wins the election, it won’t make much difference for AhnLab. The local software industry has been in tough conditions that are unfavorable for technologically competitive but small- and medium-sized players like AhnLab,” he said. “Of course he is likely to try to make a level playing field for small software firms, but it won’t immediately affect his company.”
