NH Investment & Securities on the 24th said that while a city gas rate hike within the year looks unlikely for Korea Gas Corporation, its dividends appeal stands out. It maintained a Buy rating and a target price of 50,000 won. Korea Gas Corporation's previous closing price was 38,650 won.
NH Investment & Securities explained that maintaining its investment opinion and target price was due to dividend appeal with high visibility based on stable earnings.
Lee Min-jae, an analyst at NH Investment & Securities, said, "In particular, if Korea Electric Power Corporation, the largest shareholder, raises its payout ratio amid an urgent need to secure funds, the dividends appeal is expected to grow further."
NH Investment & Securities estimated the separate cumulative net profit, which serves as the basis for dividends, at 612 billion won. It also forecast a 40% payout ratio and a dividend yield of 5.4% based on the target price.
However, it projected that collecting receivables would be difficult. With the city gas rate hike not materializing in the first half, the likelihood of aggressively collecting receivables in the trillion-won range each year has diminished, according to the analysis. That said, with crude oil and natural gas prices stabilizing, it viewed the possibility of additional large-scale receivables arising as low.
Under the current government stance, the likelihood of large-scale overseas resource development projects proceeding is also low, so the financial structure is not expected to deteriorate further. In the first half of this year, Korea Gas Corporation's receivables totaled 14.2 trillion won.
Meanwhile, with the third quarter being the off-season, NH Investment & Securities expected Korea Gas Corporation to post 8 trillion won in revenue and 365 billion won in operating profit on a consolidation basis. These are decreases of 2% and 17%, respectively, from a year earlier, and are expected to be in line with the consensus (market forecast).