April 20, 2024

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[THE INVESTOR] Innocean Worldwide’s fundamentals will not be affected by the recent inter-group transaction issue, said Daishin Investment and Securities on Aug. 22, maintaining a “buy” recommendation and 91,000 won (US$81.37) target price.

Its stock price has declined from the recent revision process of fair trade law, strengthening regulations on funneling business among affiliates. Investors are concerned about 10 percent overhang of stake owned by its largest shareholder, the eldest daughter of Hyundai Motor Group chairman, and earnings decline from losing captive market of its affiliates. Even when the revision is confirmed, it is very unlikely that the largest shareholder’s stake will be sold in the market, said analyst Kim Hoe-jae who noted that the shares would rather be sold to a strategic investor.

As for its domestic earnings, the target of internal transactions has declined to 25 percent of its total last year, from 45 percent of 2013, and there is no need to link the fair trade issue with the possibility of earnings decline. The marketing heavyweight has approximately 700 billion won in cash, which will be first used for M&As. However, the asset could also be used to expand its dividends to compensate shareholders for stock price fall from external variables, said the analyst. 

By Hwang You-mee (glamazon@heraldcorp.com)