By Kwanwoo Jun
Korea Electric Power shares rallied Monday on hopes for a possible boost from a government plan to enhance the value of listed companies.
The South Korean state utility’s stock rose 10% to close at 23,200 won ($17.41), its sharpest daily gain in more than three years, outperforming the benchmark Kospi’s 1.2% rise for the day, according to FactSet.
The rally came as the government prepares to announce a new initiative to boost shareholder returns and improve valuations of local companies.
The Financial Services Commission is due to detail a so-called corporate “value-up” plan later this month to address what it calls the “Korea discount” and make local equities market more attractive.
Korea Electric Power and other state utilities were among undervalued local stocks that attracted attention from investors in the wake of the government’s initiative, Eugene Investment & Securities analyst Sunghyun Hwang said in a note Monday.
The Eugene analyst said he expects Korea Electric Power to turn profitable in 2024 after three consecutive years of losses, following a series of electricity tariff increases, and that its share price has room to rise further.
Hwang kept a buy rating for the “undervalued” stock, whose price-to-book ratio he estimated at just 0.4 in 2023 and 0.3 in 2024, and raised his target price by 19% to KRW32,000.
The FSC said earlier this month that it would recommend for local companies with a price-to-book ratio of 1.0 or below, to work out detailed plans to enhance corporate valuations. The Finance Ministry said it could also consider offering tax incentives for companies to improve shareholder returns.
The price-to-book ratio of Kospi 200-listed companies averaged 0.9 in 2023, well below that of the S&P 500 in the U.S. and the Nikkei 225 in Japan, according to the Korea Exchange.
Write to Kwanwoo Jun at [email protected]
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