[Click eStock] KT=LGU+>SKT

KT CEO Koo Hyun-mo is presenting KT Group's media content business strategy on the 23rd at KT Square in Jongno-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Hwang Junho] Among the three major mobile carriers, KT was identified as the stock with the highest price outlook for next month. It is expected that the average revenue per user (ARPU) and operating profit growth per mobile subscriber will show positive trends in the first quarter of this year. Following KT, LG Uplus is expected to have high expectations for an earnings surprise despite the risk associated with Huawei's 5G equipment. On the other hand, SK Telecom is forecasted to potentially face negative impacts on its stock price due to the issue of a spin-off.

Researcher Kim Hongsik of Hana Financial Investment stated this on the 24th in the April investment strategy for the telecommunications services sector. Kim maintained the investment attractiveness of the telecommunications services sector in April as "very high," citing that from the first quarter of this year, the increase in net 5G subscribers will lead to a significant rise in mobile ARPU. The average ARPU of the three major telecom companies is expected to grow by 3% this year.

LG Uplus was identified as having high annual investment attractiveness, while KT was selected as a promising stock for next month. Researcher Kim analyzed, "In the case of KT, with the first quarter earnings season approaching, the perception of it being both a stock with improving performance and an absolutely undervalued stock is spreading, which could lead to a strong rise in stock price."

In the first quarter of this year, KT's mobile ARPU grew by 3% year-on-year and 1% quarter-on-quarter, and it is expected to achieve over 3% ARPU growth this year. Meanwhile, marketing expenses are expected to increase by 10% year-on-year, but depreciation expenses are showing a stagnant trend, leading to an anticipated 7% growth in consolidated operating profit. He also noted that the expected dividend yield recently reached 6%. Accordingly, KT's 3-month expected stock price band is set at 25,000 to 35,000 KRW, with a 12-month target price of 35,000 KRW.

LG Uplus is also expected to show strong earnings performance. Particularly, considering that it recorded an impairment loss of 20 billion KRW related to the 28GHz frequency band in the fourth quarter of last year, there is a high possibility of positive earnings in the first quarter of this year. Additionally, with the merger issue between LG Uplus and HelloVision expected to resurface within the year, it is anticipated that the company may engage in share buybacks to boost its stock price. Accordingly, LG Uplus's 3-month expected stock price band is set at 11,500 to 18,000 KRW, with a 12-month target price maintained at 18,000 KRW.

Regarding SK Telecom, attention to the risk of a spin-off was advised. He explained, "Considering SK Telecom's future earnings outlook and the rising value of its subsidiaries, buying would be the right choice, but if the spin-off decision is made, investment sentiment is likely to cool sharply, so a cautious stance is needed for now."

Typically, the combined market capitalization of two companies after a spin-off tends to be higher than before the split, but this is unlikely to apply to SK Telecom. Most companies undergoing a spin-off complete all procedures after the major shareholder conducts a stock exchange through a contribution in kind. However, SK Telecom must proceed with a merger between the holding company and the intermediate holding company. The merger ratio is not favorable to the major shareholder, so it is necessary to widen the market capitalization gap between SK and the intermediate holding company. This is to prevent significant dilution of Chairman Chey Tae-won's stake in SK Inc. Accordingly, he analyzed, "Unlike 10 years ago, SKT's spin-off is unlikely to act as an opportunity factor for minority shareholders."

This content was produced with the assistance of AI translation services.