[Kosdaq Star] Ubiquoss makes V-shaped recovery on 5G impetus

This is the 48th in a series of articles analyzing major companies traded on the tech-heavy Kosdaq market. -- Ed.

South Korea announced in October last year the upcoming PyeongChang Olympic Winter Games will become the test bed for the nation‘s first fifth-generation network.

The news triggered anticipation for the hyper-connectivity -- or connectivity between humans and things -- powered by what would roughly be 10 times faster than 4G long-term evolution standard in the country that boasts the fastest internet in the world. 

Riding the 5G impetus, the nation’s telecommunication infrastructure providers showed upswing on the second-tier Kosdaq from mid-October until the year-end. One of the firms was a broadband network hardware provider Ubiquoss, which maintained the V-shaped recovery until Friday. 

The share price of Ubiquoss, listed on Kosdaq in March 2017, jumped twofold in two months until December. After the linear growth, the firm’s share hit a 52-week high at 28,350 won ($26.6) during trading on Dec. 14, in stark contrast to a 52-week low at 15,300 won on Oct. 13. On Friday, Ubiquoss closed at 26,500 won.

Increased foreign investor attention in December drove up Ubiquoss’ cosmic performance. Offshore investors in the past 20 trading days net purchased nearly 140,000 stocks of Ubiquoss. As of Friday, offshore investors held 9.5 percent of shares, up 1.6 percentage points from Dec. 4.

“Shares in the telecommunications industry appears to be on top of market cycle in about half a decade,” Park Jong-sun, a small-cap analyst at Eugene Investment & Securities, told The Korea Herald.

Park cited an impending boom in investment for network infrastructure changeover, as the 5G adoption is increasingly becoming a reality. More investments translate into more business opportunities and more profits to firms like Ubiquoss. 

Ubiquoss, maker of ethernet switches, fiber-to-the-premises, among other advanced network hardware products, is already on track. It has teamed up with local internet service provider LG Uplus to develop an internet service solution for national 5G broadband network, enabling data transmission at rates of 100 gigabits per second. The pilot version of the solution was launched on Dec. 20, 2017, while the ethernet switches for 5G network developed a month prior.

The full-fledged technology, which the firms plan to launch this year, would be a prerequisite for media such as virtual reality, augmented reality and holograms.

Another analyst, Kim Hoi-jae of Daishin Securities, wrote in a note that the role of fiber optic cable makers will be crucial for infrastructure switchover in the wake of the 5G era.

“While wireless network technology evolves into 5G, the fiber optic infrastructure will still take central roles in terms of data transmission,” Kim wrote.

Another boon to Ubiquoss would be the soaring demand for the replacement of mobile backhaul products at the 4G standard -- used to link backbone network and subnetworks -- into those for the 5G network, produced by the firm and its rival Dasan Networks in Korea, according to Kim Hong-shik, an analyst at Hana Financial Investment. 

Ubiquoss was spun off from Ubiquoss Holdings and began trading on the Kosdaq market on March 31, 2017.

Since then, the share price of the firm has been on a gradual downtrend and bottomed out in mid-October, similar to other shares of firms devoted to wired or wireless network infrastructure business.

“Investors had taken a conservative approach due to the lack of profitability of telecom firms,” Park of Eugene Investment & Securities said. “But for the past few months, investors have grown aggressive and viewed the Ubiquoss stocks as cheap.”

Korea plans to commercialize mobile 5G networks across the nation by no later than March 2019, for the first time in the world.

Ubiquoss mainly targets the domestic market. As of September 2017, the firm had a net profit worth 7 billion won and a net operating profit worth 7.5 billion won for two quarters.

Founded in 2000, Ubiquoss is the second-largest network cable maker in market cap of 135.8 billion won following Dasan Networks, the 449th-largest out of some 1,200 Kosdaq-listed firms. Its holding firm Ubiquoss Holdings has 111.4 billion won in market cap.

By Son Ji-hyoung
(consnow@heraldcorp.com)