Korean Air’s announcement of mid- to long-term vision will boost its corporate value, said Hanwha Investment and Securities on Feb. 20 maintaining a “buy” recommendation and 43,000 won (US$38.33) target price.
When its credit rating has improved, interest rate of its loans will be lowered and result in over 100 billion won cost reduction. This will improve its return on equity by 2.5 percent from previous estimates. It has completed investment in larger aircrafts last year and its capital expenditure will decline to 1 trillion won this year. Possibilities of temporary capital outflow, such as financing Hanjin Shipping, which has dented its credit rating, are slimmer, and the airline company’s financial structure improvement will gain momentum, said analyst Kim Yu-hyeok.
The recent shift to promote shareholder values across Hanjin Group also will be positive, especially when considering Korean Air’s low dividend rate, added the analyst.
