Another Asian Oil Opportunity

Written by GSCR Staff   
Wednesday, 14 January 2015 08:05

In case you missed it, we delved into the cheap oil trade again in Monday’s Goldman Guide.

Our belief is that emerging markets in Asia could benefit a great deal with sustained low oil and gas prices due to the fact they are major importers and consumers with little internal production. One of the major market benefactors could be India, as they were fourth on the worldwide list for consumption and imports for oil. Right below them on the import side is another great Asian story, South Korea. Finding a great opportunity here should be straightforward.

 

The automotive, telecommunications, and technology industries have grown and thrived in South Korea over the years. One telecommunications ADR that we believe is a great value is KT Corporation (NYSE – KT - $13.71). Its services comprise mobile telecommunications services; telephone services, including local, domestic long-distance and international long-distance, fixed-line and VoIP telephone services, and interconnection services to other telecommunications companies; and broadband Internet access services and other Internet-related services, such as IP-TV services.   As of December 31, 2013, the Company served approximately 16,454,000 mobile subscribers; and approximately 5 million IP-TV subscribers.

 

KT 1-Year Chart

(Source: www.otcmarkets.com)

 

MM.01.14.15-KT-1year-hs

 

 

KT is just 4% off its 52-week low after hitting a 52-week high in late September in what appears to be the bottom of a classic head and shoulders pattern technical indicator. Additionally, a forward P/E of just over 5 and a PEG ratio of 0.2 indicate the stock has value. Finally, an ultra low short float of just 0.13% indicates the long term prosperity of the Company is doubted by very few.

 

We think the technical and value trade are in play here. Lower oil and gas prices could fuel even higher demand and expansion of products for KT Corporation over the current forecast growth rate of 1-2% for the entire industry in South Korea. KT should jump back up to the $18 level by the end of 2Q15.

 

Have a great day!

 

Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.

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