HHI Holdings is a dividend stock that remains undervalued to NAV. The firm started paying out interim dividends this year. We expect the earnings improvement trend at subsidiaries to sustain thanks to favorable business environments.
Undervalued for two years
We raise our TP on HHI Holdings from W80,000 to W100,000, reflecting: 1) a 23% jump in NAV compared to our last report (Apr 13); and 2) a 30% discount as a holding company. Over the past two years, NAV has risen 54% thanks to share price hikes at subsidiaries, but HHI Holdings’ share price has remained flat. Significant share price growth is expected in the process of resolving this disparity.
Interim dividend of W1,850 per share
The firm is making efforts to enhance shareholder value through an active dividend policy. It announced plans to maintain a dividend payout ratio of 70% on a separate basis and target payout ratios of 30% at subsidiaries.
The company recently announced an interim dividend of W1,850 per share, its first since listing, and a similar level of dividend is expected at yearend.
Business environment favorable; order intake growth and earnings improvement expected at subsidiaries
Favorable business environments continue at subsidiaries. Sales and OP are rising at the petrochemical, construction machinery, and electrical equipment divisions, and vessel prices and orders continue to climb at the shipbuilding division. As a result, subsidiaries’ shares prices are expected to rise, and NAV should climb accordingly.
Source: Business Korea