Read original blog entry
KT Corporation's (KTC)fixed-line revenue is likely to decline over the near-term, as wireless substitution continues and VoIP competition enters the market. Intensifying broadband competition and continued regulatory pressures are also expected to compress future revenue growth levels.
We see limited downside in the shares due to KT's higher dividend and modest valuation. KT paid a dividend of $1.07 (KRW 2,000) which equates to a payout yield of 4.2%.
However, the company's business catalysts are not yet overly convincing that would drive up share demand, in our opinion and, therefore, we maintain our Hold recommendation. KT is trading at a forward multiple of 10.1x our 2008 EPADS estimate, which is in the mid-range for its global peers. We expect KT to generate modest top-line growth and the company's cost structure is relatively inflexible (due to government regulations and the power of its trade unions).
Admittedly, the company's leadership position in the Korean telecom market and its focus on next-generation broadband and wireless services should partially offset the effects of intensifying competition and a difficult regulatory environment. Our six-month $26 price target is based on a target P/E of 11.5x our 2007 EPADS estimate.
Read the full analyst report on KTC.
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.