[Click eStock] "Korea Gas Corporation, Dividend Increase Will Be Difficult"

On November 13, Hanwha Investment & Securities maintained its "Buy" rating and target price of 57,000 won for Korea Gas Corporation, stating that while dividends are expected to continue, a significant increase in dividends will be difficult.

Korea Gas Corporation posted sales of 6.4 trillion won and operating profit of 389 billion won in the third quarter of this year. These figures represent a decrease of 21.4% and 11.5%, respectively, compared to the same period last year.

Song Yurim, an analyst at Hanwha Investment & Securities, commented, "Operating profit exceeded the consensus (the average forecast by securities firms) of 324.8 billion won by 19.8%. Although total sales saw a double-digit decline due to a decrease in LNG sales volume and a drop in unit prices, operating profit surpassed market expectations as overseas subsidiaries performed more robustly than anticipated, despite weak energy prices."

There are expectations that dividends will be sustained, but a significant increase is unlikely. The analyst explained, "Dividends will continue this year based on solid standalone earnings, but it is difficult to expect a meaningful increase. Considering the potential for foreign exchange valuation losses due to a stronger exchange rate in the fourth quarter and the absence of a decrease in accounts receivable for civilian use, it is hard to expect a substantial rise in both dividend per share (DPS) and payout ratio."

An increase in gas rates is necessary to achieve a meaningful reduction in accounts receivable for civilian use. The analyst added, "As we have seen so far, a significant decrease in accounts receivable for civilian use requires a gas rate hike. It would be prudent to wait until after the winter season and see when a rate increase might be implemented next year."

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