[Click eStock] KT Eases Overhang Concerns

[Asia Economy Reporter Junho Hwang] Daishin Securities positively evaluated the strategic relationship established with KT and Shinhan Financial Investment on the 18th, maintaining the target stock price at 46,000 KRW. It is assessed that the overhang of the second-largest shareholder was resolved through equity partnership.

KT and Shinhan Financial announced the promotion of future growth DX business based on digital platform technology and signed an equity and business partnership agreement. Shinhan Bank decided to acquire 5.46% of KT's shares (worth 437.5 billion KRW), previously held by Japan's NTT Docomo, through a block deal at 30,687 KRW per share with almost no discount.

KT also signed a specific money trust contract to acquire shares of Shinhan Financial Group of the same scale. From the 26th of this month to January 25th of next year, KT will sequentially acquire shares whose one-year lock-up period for Shinhan Financial's financial investors (FI) expires. The planned acquisition scale is 2.1% based on the current stock price (total amount 437.5 billion KRW).

Through this, KT can prevent the overhang issue caused by a large volume of shares flooding the market. Daishin Securities also evaluated positively from the perspective that KT signaled it is actively responding to concerns about corporate value decline.

Additionally, the two companies will combine KT's digital platform capabilities with Shinhan Financial Group's financial expertise to promote 23 joint projects focused on future financial DX (Digital Transformation) and new platform businesses. In the future financial DX field, projects include finance-specialized AICC (AI Contact Center), alternative credit evaluation models based on KT's commercial district data, and the construction of Shinhan Bank's future-type branches based on KT's AI/robot solutions.

Kim Hoejae, a researcher at Daishin Securities, explained, "The target stock price is a figure obtained by applying a price-earnings ratio (PER) of 13 times to this year's expected earnings per share (EPS) of 3,505 KRW (applying an average of 12-15 times during the early ARPU increase period of LTE, as ARPU enters a long-term upward cycle)."