[Kosdaq Star] ‘Smart’ momentum highlights Posco ICT

This is the 50th in a series of articles analyzing major companies traded on the tech-heavy Kosdaq market. -- Ed.

Posco ICT, an affiliate of steelmaking giant Posco, is one of a few stocks that step outside the box of dominantly strong sectors such as biopharma on the second-tier Kosdaq bourse, showing a stellar performance on its “smart” business portfolio.

Growing global demand for building “smart” cities -- those built on infrastructure powered by information and communication technology -- has brought to the spotlight the first Korean company to join smart city projects overseas.

Posco ICT closed at 9,240 won ($8.50) per share Friday. Ithas jumped 11.3 percent in the past 20 trading days.

Also in those 20 trading days, foreign investors net purchased 864,671 shares. Institutional investors have net sold 518,321 shares in the past month. The figure nearly halved through an institutional net purchase of 464,283 shares in the past three trading days.

On Jan. 9, during the week of the Consumer Electronics Show in Las Vegas, Posco ICT signed a memorandum of understanding with San Francisco-based smart construction company DPR Construction. 

In April last year, Posco ICT unveiled plans to build ICT-powered infrastructure in a $4 billion project in South Saad Al-Abdullah, Kuwait‘s first smart city, becoming the first Korean firm to join such an overseas project.

The demand to build smart cities is “drastically increasing,” said Jeon Sang-yong, an analyst at Taurus Investment & Securities, citing increased investments from Alphabet-affiliated Sidewalk Labs, Huawei and Amazon.

Posco ICT also runs other “smart” businesses, including smart construction, a smart factory and smart data center. Local factory operators, including Posco Chemtech and Posco Coated & Color Steel, have sought to build automated smart factories by partnering with Posco ICT.

Posco ICT is looking to up the game, pledging on Jan. 15 to launch “Smart X” this year, a solution to incorporate its smart technology with artificial intelligence, augmented reality, big data and blockchain. Solely on Jan. 15, the share price surged 7.7 percent and foreign investors net purchased over 730,000 shares.

Separate from the smart businesses, Posco ICT has built domestic infrastructure for electric vehicles. Posco ICT, one of five firms licensed to provide electric vehicle-charging stations, has installed over 500 public electric vehicle chargers and over 4,000 home chargers. It has partnered with carmakers such as Hyundai Motor, BMW and General Motors. 

Moreover, news of the launch of KRX 300, a new composite benchmark index to represent the nation and replace the benchmark Kospi 200, is expected to result in greater capital influx to Posco ICT from foreign and institutional investors.

With Kospi 200 tracked by major exchange-traded funds, exchange-traded notes or futures, there had been concerns that Kosdaq firms were largely excluded from large-scale investments, leading to a failure to address Kosdaq giants’ fleeing to the top-tier Kospi, until the arrival of KRX 300.

Posco ICT, the 24th-largest by market cap on Kosdaq, is expected to account for 0.05 percent of the combined market cap of KRX 300-listed firms.

Park Chun-young, an analyst at Daishin Securities, has picked Posco ICT as one of the nine Kosdaq-listed firms to enjoy enhanced inflow of investments. However, Posco ICT was one of two among nine to receive lackluster response from pension funds. Pension funds’ investment tendencies have changed since the announcement to create the KRX 300 on Jan. 11, compared to the previous three years’ average, according to Park.

As for earnings, Posco ICT‘s net profit and operating profit in 2017 came to 42 billion won and 56.1 billion won, respectively, up 11.8 percent and 7.3 percent from the previous year.

However, Park Jong-kuk, an analyst at Kiwoom Securities, wrote in a note in January that the firm’s growth was below expectations, citing a deficit of 13.9 billion won in its alternative energy-related business in the second half of 2017. 

Founded in 1989, Posco ICT, then known as Posdata, was listed on Kosdaq in 2000. Posdata and Poscon, both affiliates of Posco Group, merged in 2010 under the name Posco ICT. Posco owned 65.38 percent of Posco ICT as of the third quarter of 2017.

Choi Doo-whan, chief executive officer of Posco ICT, owns 0.03 percent of shares. Formerly with Nokia Bell Labs and KT, as well as Seoul National University, the 64-year-old Choi joined the company in 2014 as CEO.

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