South Korea’s SKC Co., a chemical and tech material producing unit of SK Group, has been witnessing a rally in its stocks over the last two months after its restructuring carried out last year has allowed the company to concentrate its resources to produce more high value-added products.
SKC stocks soared 26 percent from 27,250 won closing of November 9 to an intraday high of 34,350 won on January 2. Despite the recent rally, many market analysts believe the company’s stock is still undervalued citing its price-to-book ratio (PBR) of 0.82 that is lower than an average of 1.45 of its peers. Based on the forecast of local brokerage houses, the company’s shares would climb up to reach 40,250 won.
Market analysts attributed the rosy outlook to the company’s restructuring and downsizing efforts that had been made last year. SKC has cut 20 percent of its work force as its core film making business was in a slump over the last three years. It also sold off its loss-making subsidiary SKC Solmics’ photovoltaic business.
“SKC’s restructuring and related costs reached around 61 billion won ($50.6 million) last year,” said Hwang Gyu-won from Yuanta Securities Korea Co. “The restructuring has laid the foundation to increase production of high value-added films for semiconductors or automobiles while cutting output of optical films and packaging films that have been loss making.”
SKC is the world’s fourth largest polyester (PET) film maker and Korea’s dominant supplier of propylene oxide (PO), accounting for half of the country’s demand. Its film business posted an operating loss of 2 billion won and sales of 163 billion won during the January to September period last year while its chemical business recorded an operating profit of 27 billion won on sales of 180 billion won.
Market experts predict the company’s profitability would significantly improve this year. Thanks to the restructuring, its film business is expected to return to profit and the chemical business would continue to show a sound performance for the time being until its formidable rival S-Oil Corp. completes its PO production facility at the latter half of 2018.
According to the country’s market data provider FnGuide, SKC is forecast to record 212.5 billion won in operating profit and 2.46 trillion won in sales this year, up 43.51 percent and 5.66 percent respectively from last year.
On Monday, shares of SKC fell 2.9 percent, or 290 won, to end at 31,550 won in Seoul trading.
By Yoon Jin-ho
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]