[Click eStock] "Korea Gas Corporation, Expectations for Normalization of Performance, Dividends, and Stock Price Next Year"

by Keum Boryeong

Published 30 Dec.2020 08:02(KST)

Kiwoom Securities Issues 'Buy' Investment Rating and Sets Target Price at 40,000 Won... Closing Price on 29th is 30,350 Won

[Click eStock] "Korea Gas Corporation, Expectations for Normalization of Performance, Dividends, and Stock Price Next Year"

[Asia Economy Reporter Kum Boryeong] There is a forecast that next year will see the normalization of Korea Gas Corporation's performance, dividends, and stock price.

According to Kiwoom Securities on the 30th, Korea Gas Corporation's operating profit for the fourth quarter of this year is estimated at 391.3 billion KRW, down 7% from the previous year. Although oil prices rebounded from the bottom in the second quarter and are expected to improve compared to the third quarter, the level remains lower than the previous year, and the restart of the Prelude offshore floating liquefied natural gas (FLNG) plant in Australia has been delayed again beyond expectations, making underperformance inevitable compared to initial expectations.

However, Kiwoom Securities forecast Korea Gas Corporation's operating profit next year at 1.265 trillion KRW, a 23% increase from the previous year, expecting a recovery to the 2018-2019 average level of about 1.3 trillion KRW. Researcher Lee Jong-hyung of Kiwoom Securities explained, "Domestic gas wholesale business is expected to have an operating profit similar to this year’s approximately 1.2 trillion KRW due to an increase in appropriate investment returns despite some decline in the base rate. Overseas block profits are expected to improve by more than 200 billion KRW compared to this year due to oil price recovery and the resumption of production at Australia's Prelude early next year." He added, "The Prelude in Australia stopped operating from February due to equipment issues, recording an operating loss of over 100 billion KRW this year, but next year, with the restart, it is expected to lead to performance improvement in overseas business."

Normalization of dividends and stock prices is also anticipated. Researcher Lee said, "Due to the reflection of about 440 billion KRW in impairment losses on overseas blocks in the second quarter of this year, dividends are expected to be difficult this year, but if there are no special impairment losses or one-time foreign exchange-related valuation losses next year, a high dividend of over 2,000 KRW per share can be expected." He analyzed, "Following the electricity price system reform, the stock price of Korea Electric Power Corporation, which surged sharply, and the valuations of utility companies that had been suppressed for a long time are rapidly normalizing recently."

Kiwoom Securities gave Korea Gas Corporation a 'Buy' investment rating with a target price of 40,000 KRW. The closing price on the 29th was 30,350 KRW.