Apparently we’re all saying this now, but I am not a financial advisor and you should do your own DD. With that being said, I present you with the following:
I’m a fan of DFV the man, but I’m more interested in really really deep fucking value. This will likely be a long post, but I think you’ll find value in it if you can follow along (see what I did there?).
For those of you kids who can’t read good, I’ll put the TLDR right here at the top: KT Corp ($KT) is so undervalued it’s almost fucking embarrassing. When I say undervalued, I don’t mean by a little bit… I mean if this thing doubled it would still be a good value. At the time of my writing this, KT is trading at $10.62. A realistic price target, if the market were to properly value this company, is ~$30.00 I’ll go in depth as to why as we continue through this story, but the long and short of it is the Tangible Book Value of KT Corporation is $19.66/share. What does that mean? It means if KT declared bankruptcy tomorrow, was forced to sell off all of its tangible assets and pay back its debt, the remaining money to be returned to shareholders would be $19.66/share. This does not take into consideration intangible assets – which have real value (in the $BILLIONS), but are harder to assess. Again, it’s trading at $10.62 as of this writing (a price/tangible book value of only 0.54). Value investors typically look for stocks trading at <3.0 price/TBV. Deep value would be <1.0. KT is trading at 0.54, and a price/book ratio of 0.42!
Shares are cheap, options are cheap. Do what you will – hell, sell it short if you want – but I like shares and calls.
KT CORPORATE PROFILE
KT Corporation (formerly Korea Telecom) is a South Korean integrated telecom conglomerate which was founded in 1885 – but realistically in 1981 in a more noticeable form – with business operations sprinkled throughout Asia, Africa, USA & Poland. KT is South Korea’s first telecom company and dominates Korean market share in many of the spaces in which they compete:
Line of Business | % of Korean Market Share
:--|--:
Mobile Services | 31.4%
Fixed-line local telephone & VoIP | 64.9%
Broadband Internet Access | 40.9%
Pay TV Services | 31.6%
As a conglomerate, KT has their hands in a number of diversified pots.
Products & Services | % of Total Revenue
:--|--:
Mobile Services (incl. 5G) | 27.3%
Fixed-line (incl. VoIP, broadband, data comm.) | 19.5%
Media & Content | 10.1%
Financial Services (incl. credit card solutions) | 14.6%
Other (incl. IT, network services, real estate development) | 11.6%
Sale of goods (primarily mobile handsets) | 16.8%
Corporate Location Map:
https://i.imgur.com/syXIRxy.jpeg
KT has ~30% institutional ownership, with BlackRock being a large buyer in Q4 2020. KT has also filed paperwork for a massive share repurchase program. For what it’s worth in this day and age, the short % of shares outstanding is a measly 0.09%. No one is going short on this thing at its current price. You’d literally have to be insane to short it – it’d be like picking up pennies in front of a steamroller.
FINANCIAL METRICS & PEER COMPARISONS
KT’s balance sheet is rock solid. While it may not have the booming high growth of clean tech or cannabis, it is still growing and maybe more importantly, doing so profitably. I touched on the tangible book value in the TLDR above, but this cannot be understated. If you were to liquidate the company entirely, shareholders would receive $20-30 per share after the debt had been repaid. I have highlighted some comparison ratios in the images below to show the truly disgusting undervaluation of KT.
Compared to US-based telecom services index peers:
https://i.imgur.com/iOmE5mI.jpeg
Using a comp multiple for valuation based on these index comps gives the following implied value per share for KT ranging from $26.33 - $109.88 (unrealistic top end):
https://i.imgur.com/0