[Into the Stocks] 'Digico KT' Hits Record Highs... Dividend Appeal Also Emerges

[Asia Economy Reporter Ji Yeon-jin] KT's transformation has begun. Since Gu Hyun-mo, KT's CEO, took office last year and declared the 'Digico (Digital Platform Company) transition,' the company is set to break away from the already saturated telecommunications market and transform into a new growth model. This year, with inflation rising and telecommunications stocks emerging as inflation-defensive stocks, combined with the Digico transition, KT's stock price has been hitting new highs day after day. Additionally, with the added appeal of dividends, there are forecasts that the stock price will rise further.

◆ 'Digico KT,' Dividend Appeal Rapidly Rising = According to the financial investment industry, KT shared its management performance over the past year and future growth plans and outlook at a 'corporate briefing' on the 21st. Earlier, CEO Gu presented a blueprint in May last year at the same event, stating that KT would grow centered on 'platform' and 'B2B.' Since then, KT has accelerated growth in the media and content sectors through vertical integration such as 'IP-production-channel-platform,' and in the financial business, it is establishing itself as a platform operator providing services that combine telecommunications, finance, assets, consumption, and data, centered on BC Card and K Bank.

'Digico KT' has also shown results. KT's consolidated sales in the first quarter reached 6.0294 trillion KRW, a 3.4% increase year-on-year, and operating profit rose 15.4% to 444.2 billion KRW. Sales in the B2B sector, including cloud, data centers, and security, grew about 13% compared to the same period last year, and sales in IPTV, payment/authentication, and content markets grew about 21%, standing out in the Digico field.

This performance improvement is expected to enhance dividend appeal. KT reiterated its mid-term dividend policy presented last year, maintaining '50% of separate net profit from 2020 to 2022,' increasing the possibility of an absolute dividend increase this year. Last year's dividend per share was 1,350 KRW, up from 1,100 KRW the previous year. Minha Choi, a researcher at Samsung Securities, estimated this year's dividend per share at 1,550 KRW. Researcher Choi said, "There is a possibility of early achievement of next year's financial targets," and "KT is expected to focus on growing areas with less regulation and high growth potential."

The securities industry expects KT to continue structural reforms for group reorganization, M&A, and equity investments. Over the past year, KT has acquired Hyundai HCN and RT Media, and invested in Hyundai Robotics and Bank Salad. Currently, the KTH-KT M House merger (scheduled for July 1) is underway, and the acquisition of Wirecard Vietnam is also being pursued. Additionally, KT is known to be pushing for the IPOs of K Bank and Studio Gini in 2023.

◆ Stock Price Soars 37% This Year... Is It Still a Good Time to Invest? = KT's stock price has soared this year as expectations for change have translated into performance. Compared to the beginning of the year, the stock price rose 37.29% as of the previous day, with a sharp 15.70% increase this month alone. After hitting a 52-week high of 33,200 KRW the day before, it rose further to 33,500 KRW, setting a new record. This is close to the lowest target price of 35,000 KRW set by securities firms over the past three months. Researcher Kim Heung-sik, who set this target on the 21st, stated, "We plan to raise the target price based on future performance and dividend outlook." Considering trends in average revenue per mobile subscriber, labor costs, depreciation, and marketing expenses, KT is expected to enter a long-term profit growth trend, and given the operating profit outlook, a strong trend of dividend increases is expected to continue.

Researcher Kim said, "I believe KT's stock price will rebound to at least an expected dividend yield of 4%, which corresponds to a target price of 40,000 KRW." He added, "In the long term, if the dividend per share (DPS) rises to 1,800 KRW in 2022 and the real 5G era begins, lowering the expected dividend yield to 3.6%, KT's stock price could rise to 50,000 KRW in 2022."

As labor costs are expected to remain stagnant according to management plans, there is also a possibility of entering a long-term 'big cycle.' With the retirement of baby boomers starting, KT's number of employees decreased by 1,398 from 23,835 in 2018 to 22,437 in the first quarter of this year. In the first quarter alone, 247 employees left, and the retirement scale is expected to increase further from this year.

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