KOGAS (036460.KS): Entering a virtuous cycle
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- 1Q18 results met consensus expectations, backed by growing earnings from GLNG and regulated businesses.
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- The rate of return for regulated businesses should grow further in 2019 on higher interest rates and a steadily
increasing rate base.
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- Overseas earnings should pick up further going forward on the expanding profitability of GLNG and earnings
recognition of Prelude FLNG (2019) and Mozambique FLNG (2022).
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- The expected FIDs for LNG Canada and the Mozambique Mamba gas field are expected to provide long-term
growth catalysts.
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- Given the prospect of growth in the rate of return, we trim our discount on regulated businesses from 40% to 30%
and raise our target price to KRW79,000. We add KOGAS, our utility sector top pick, to our Conviction Call list.
Korea Gas Corporation is a Korea-based company principally engaged in the sale of natural gas. The Company operates its business through two segments. The Gas Introduction and Sale Business segment sells city gas and natural gas for power generation, among others. This segment introduces liquefied natural gas (LNG) from overseas natural gas production sites and supplies it to domestic power generation companies and city gas companies through national pipelines, tank lorry and others. The Other segment is engaged in the repair and maintenance of gas facilities, the construction and operation of LNG terminals, and the provision of engineering services.
Hyundai Motor Investment & Securities is the investment banking arm of the Hyundai Motor Group. The company offers stock brokerage and advisory services; derivative products brokerage and advisory services; wrap account portfolio management services; and VIP wealth management and tax planning, institutional equities, derivatives, and futures brokerage services, as well as sells investment and institutional products. It also provides equity offering, ABS, real estate PF and real estate PF securitization, offshore SOC, structured financing, asset securitization, real estate sales, IPO advisory, and private equity fund and fund management services; and CMA/RP portfolio management and fixed income based investments, as well as involved in the issuance, management, and brokerage of OTC derivatives. In addition, the company offers research services, including macro economic forecasts and stock market outlook, industry overviews and forecasts, fixed income strategies, corporate credit analysis, and valuation analysis. Further, it offers a range of retirement and pension services for individuals and corporate members; portfolios and asset allocation consulting and marketing services; proposing retirement pension plans; contract and payment management services; pension plan advisory and actuarial services; and system development and implementation services, as well as operates call centers for retirement pension services, etc.
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