DB Securities said on the 11th that Dentium's execution of retiring all of its treasury shares that day is expected to sharply boost earnings per share (EPS). It maintained a Buy recommendation and raised the target price to 63,000 won. Dentium's previous closing price was 53,200 won.
Dentium earlier announced in Aug. last year that it would retire 2.43 million treasury shares—22.9% of total shares outstanding—in stages over three years, 810,000 shares each time. However, after retiring 810,000 shares in the first round in Jan. this year, it decided to retire an additional 1.63 million shares in Mar.
Kim Ji-eun, a DB Securities analyst, said, "In effect, the structure has been changed to retire virtually all treasury shares in a short period," and noted, "Following Align Partners' equity acquisition, shareholder return demands and a proxy contest ahead of the shareholder meeting appear to have had an impact."
DB Securities estimated that, if Dentium retires all treasury shares, the simple EPS uplift would be about 31.3%.
This year's revenue is forecast at 386.9 billion won, up 11.7% from a year earlier, and operating profit at 78.1 billion won, up 21.8%. The share of revenue from China is expected to decline to 36.1% this year, diversifying the regional mix.
Kim said, "This year, the company is expected to maintain its expense efficiency stance, but it posted a net loss due to an asset impairment at the Shanghai manufacturing subsidiary in China in the fourth quarter of last year," and added, "There is room to raise net profit estimates depending on the timing of the second volume-based procurement (VBP) within the year."
In the near term, it is necessary to watch the results of the shareholder meeting on the 31st and whether additional shareholder return policies are announced. Kim said, "The current share price is in a historically undervalued range," and assessed that the stock is entering a phase of rising valuation appeal.