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KET (www.ket.com) produces approximately 10 thousand electric terminals and communications parts and components. The company manufactures a variety of products in small quantity.
Because they manufacture a wide range of products, they are less influenced by exchange rates and raw material costs. They have also recorded stable growth.
Thanks to CEO Chang-Won Lee¡¯s business strategy which focuses on maximizing profit by advancing technology and reducing financial costs, KET boasts of a stable financial structure with a low debt ratio.
Many analysts believe that the company¡¯s stock price does not reflect the company¡¯s performance.
As of the 11th, the company¡¯s stock price stands at 10,600 won (face value at 500 won). This is a meager 5.6 times the PER, which is based on last year¡¯s performance.
Considering the fact that last year¡¯s dividend was 2000 won, which is 40% of the face value, the company¡¯s stocks can be seen as a promising long-term dividend investment item.
Most agree that this underestimation of stock prices is due to the company¡¯s conservative business practices and the current situation of the entire industry.
Keun-Chang Roh, a head researcher at Shinyoung Securities, says, ¡°the performance of a components company depends heavily on the overall condition of the communications or electronics industry.
Since there was an overall recession in related industries during the first quarter of the year, we can expect a recovery during the second quarter.¡±
¡ÞProfit Ratio of Net Worth 20%£½With last year¡¯s sales standing at 115 billion won and net profit at 19.1 billion won, the Profit Ratio of New Worth (Net Profit/Net Worth), after taking into account the year-end net worth (97.6 billion won), was 19.56%. The profit ratio of net worth based on operating income was 23%.
Unlike a considerable number of Korean companies listed on the KOSDAQ which are having difficulties making interest payments, KET has good profitability. KET¡¯s financial structure is also considered stable and its debt ratio is below 30%.
According to Chang-Nam Ha, a director at KET, ¡°KET¡¯s sales and net profit is expected to stand at 138 billion won and 21.5 billion won respectively, which means we will likely be able to maintain at least last year¡¯s cash dividend.¡±
During the last quarter, KET recorded 26.6 billion won in sales and 5.4 billion won in net profit.
¡ÞSlowed Growth in Consumer Industries Causing Problems for KET£½KET¡¯s sales in communications parts and components depends solely on terminal manufacturers. That is why Telson Electronics, SK Teletech, and Motorola¡¯s meager performance last quarter has had a negative effect on KET¡¯s performance as well.
The recovery of the terminal market is crucial for KET¡¯s future since KET provides high value-added communications parts and components such as VCO and TCXO to the above-mentioned companies.
The company is also focusing on the production of DWDM transmission equipment parts.
Institutional investors project dramatic market growth for DWDM, which will benefit KET since it will supply filters for related equipment to Samsung Corning.
However, some feel that it is uncertain whether related markets will expand.
Keun-Chang Roh, a researcher, pointed out, ¡°It will be difficult for Korean companies such as Samsung Electronics to make inroads into related markets since foreign companies such as Nortel have a large market share.¡±
¡ÞStable Growth is Expected£½The company¡¯s biggest strengths lie in its technology and human resources. That is, competitors will find it difficult to catch up with KET since KET has accumulated experience in manufacturing a variety of products.
On the 25th of last month, KET was awarded the Presidential Prize in the quality category. The company¡¯s superior technology will likely lead to market dominance.
The company has succeeded in reaching its sales goal, which was set at 115 billion won early last year and announced to institutional investors. This was possible due to the company¡¯s strong stance in price negotiations.
Mr. Roh says, ¡°Even considering the conservative business practices of parts companies, the stock price should be set at around 15,000 won. In the case the market recovers, the company is likely to record a stable growth.¡±
Reporter: Yong-Woon Kang
Excerpts from : Maeil Business Newspaper
Date : May 14, 2001
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