Cheil Worldwide Anticipates Turnaround with Digital Advertising

[Asia Economy Reporter Koo Eun-mo] Cheil Worldwide, which has been responding to the COVID-19 pandemic by increasing digital advertising volume, is raising expectations for improved performance in the second half of the year.

According to the Korea Exchange on the 28th, Cheil Worldwide's stock price closed at 21,300 KRW on the 25th, up 3.15% (650 KRW) from the previous trading day. During the session, it rose to 21,700 KRW, marking the highest price since March when COVID-19 began to impact the stock market. Despite the KOSPI experiencing a 2.0% correction this month, Cheil Worldwide's stock price has shown a stable upward trend, rising 16.7%.

As companies have reduced marketing expenses due to the impact of COVID-19, leading to sluggish advertising conditions, expectations for a recovery in second-half performance starting from the third quarter appear to be reflected in the stock price. Although demand related to offline events has not recovered due to the sensitivity of the advertising industry to economic conditions, the increase in digital advertising (contactless advertising) is raising the possibility of performance improvement. According to ResearchAd, internet advertising expenditure in July increased by 10.2% compared to the same period last year.

Oh Tae-wan, a researcher at Korea Investment & Securities, said, "Cheil Worldwide has been consecutively securing new digital advertising volume from non-affiliated advertisers, gaining recognition for its digital advertising competitiveness. Additionally, marketing by affiliated advertisers such as Samsung Electronics' online Galaxy Unpacked event is being strengthened, so from the third quarter, it is expected to generate stable performance regardless of COVID-19." According to financial information provider FnGuide, Cheil Worldwide's operating profit for the third quarter of this year is estimated at 55.2 billion KRW, a 4.8% increase compared to the same period last year, and in the fourth quarter, it is expected to show a more distinct performance improvement with a 27.1% growth to 65.6 billion KRW.

As the year-end approaches, expectations for dividend income based on stable performance were also identified as a positive factor for stock price increases. Choi Min-ha, a researcher at Samsung Securities, forecasted, "Assuming a dividend payout ratio of 60.3%, similar to last year, the expected dividend yield for this year is 4.4%. As the year-end approaches, the stable profit flow and dividend attractiveness will be highlighted."