[Market Now] Risks of KAI value decline abate

Given that concerns are falling over the possibility of the Korea Aerospace Industries share price further declining following massive block equity sales from its major shareholders, analysts said fundamentals of the aircraft maker and parts developer will now be reflected in the market.

Shares of KAI, which develops FA-50 fighter jets and T-50 trainers, have been facing some headwinds as a result of stake sales by its shareholders, which include Hyundai Motor, Hanwha Techwin and Doosan Group. Its biggest shareholder – Korea Development Bank – has also indicated its intent to exit KAI.

However, Cho Chul-hee, an analyst of Korea Investment & Securities, said that since Hanwha, Doosan and Hyundai liquidated most of their KAI shares, risks concerning KAI stock overhang have abated.

“The (sell-off) situation will not severely affect KAI’s fundamentals,” Cho said, noting that the company is expected to meet the market consensus of 78.3 billion won ($67.8 million) in operating profit in the first quarter of this year, on sales of 782 billion won.

Hanwha Techwin, which supplies engine parts to KAI, has offloaded 4 percent of its 10 percent stake in KAI, and Hyundai Motor has put forth 5 percent of its 10 percent stake in the stock market. Doosan’s DPI Holdings has sold off all of its 5 percent share. State-run KDB has a 26.75 percent stake in KAI, according to a regulatory filing.

Their block sales of a combined 14 percent stake in KAI led the aircraft maker to lose about 17 percent in value. Its shares saw a 52 week high of 106,500 won and low of 54,200 won.

(hkp@heraldcorp.com)