4Q20 OP to Beat Consensus
The author is an analyst of KB Securities. He can be reached at newday@kbfg.com. -- Ed.
Raise TP to KRW165,000; Maintain BUY
We raise our TP for Samsung C&T 13.8% from KRW145,000 to KRW165,000 (target P/B multiple of 0.96x applied to 12m fwd BVPS) to reflect: (1) upward revisions to our earnings forecast (i.e., 2021E and 2022E NP attributable to controlling interest by 8.2% and 5.6%, respectively); (2) a change to the 12-month forward period; (3) an increase in total shareholders’ equity, largely driven by Samsung Electronics (SEC) share-price rally; and (4) a change in cost of equity (6.93%→8.08%) resulting from revisions to assumptions, including KB Securities’ market risk premium (5.93% in 2020→7.37% in 2021), beta, and risk-free rate. We maintain BUY on Samsung C&T as our new TP offers an upside of 15.4% vs. Jan 18 closing price (17.5% including dividends).
4Q20 OP to beat consensus
For 4Q20, we estimate K-IFRS consolidated revenue at KRW8.04tn (+4.4% YoY) and OP at KRW287.6bn (-11.4% YoY, OPM 3.6%). While revenue should be in line with consensus, OP should exceed by 10.0%. Construction should post OP comparable to the 4Q19 level. Trading and bio operations should report improved earnings. The fashion and resort divisions, however, are likely to continue to record operating losses in 4Q20.
Lee Jae-yong sent back to prison for 30 months
On Jan 18, SEC Vice Chairman Lee Jae-yong was sentenced to two and a half years in prison for paying KRW8.68bn in bribes using funds embezzled from the company as part of efforts to secure support for his ownership succession. As a result, discussions over the Samsung group’s governance change (e.g., spin-offs, M&As, stake disposals) will likely be put on hold for some time.