ANALYST REPORT
◆ News
According to the local press, Money Today, major shareholders of Kumho
Petrochemical (011780.KS) Sam-Koo Park and Saechang Park, are planning
a block sale of their stakes (together 10.45%) at approximately 5-7%
discount to the closing price of W165,500 (11/29). Based on the news
article, they are intending to use the proceeds from the block sale to invest
in Kumho Industries (002990.KS).
◆ Analysis
There would be no meaningful impact on the company's fundamentals, in
our view. Some implications, however, a) longer term benefit would be
potentially lower risk of a repeat of the management feud between the two
brothers, Chan-Koo Park (current Chairman) and Sam-Koo Park which
happened in 2009, b) reduction of group related risk which negatively
impacted Kumho Petrochemical in the past, as such changes in the
shareholding structure would likely help separate Kumho Petrochemical
from the rest of the Kumho Asiana group, according to the article.
Currently the Chairman Chan-Koo Park and his son Junkyung Park together
hold a majority stake of over 16%, as of 3Q11.
Kumho shares have underperformed the market by 13% since August 1,
2011, impacted to some extent by this potential overhang risk in the near
term, in our view.
◆ Implications
We maintain Buy on Kumho Petrochemical and 12-m SOTP-based
W250,000 target price (51% upside). We maintain our positive stance on
the company on the back of a) positive earnings momentum in the next
few quarters on the back of recent favorable raw material price
momentum, b) improving balance sheet quality in the longer run. Key
risks: global tire and petrochemical demand slowdown, fluctuations in
butadiene prices, FX movts.
