Intrinsic value of KT ADR - KT

Previous Close

$16.55

  Intrinsic Value

$28.05

stock screener

  Rating & Target

str. buy

+69%

  Value-price divergence*

+5000%

Previous close

$16.55

 
Intrinsic value

$28.05

 
Up/down potential

+69%

 
Rating

str. buy

 
Value-price divergence*

+5000%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of KT stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 7.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.08
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  19,626
  20,019
  20,479
  21,005
  21,596
  22,251
  22,969
  23,751
  24,598
  25,511
  26,490
  27,537
  28,655
  29,844
  31,109
  32,451
  33,873
  35,379
  36,970
  38,653
  40,428
  42,302
  44,279
  46,362
  48,557
  50,868
  53,302
  55,864
  58,560
  61,396
  64,379
Variable operating expenses, $m
 
  9,188
  9,399
  9,640
  9,910
  10,210
  10,539
  10,897
  11,285
  11,703
  12,151
  12,609
  13,120
  13,665
  14,244
  14,859
  15,510
  16,199
  16,928
  17,698
  18,512
  19,370
  20,275
  21,228
  22,233
  23,292
  24,406
  25,579
  26,814
  28,112
  29,478
Fixed operating expenses, $m
 
  9,906
  10,153
  10,407
  10,667
  10,934
  11,207
  11,487
  11,775
  12,069
  12,371
  12,680
  12,997
  13,322
  13,655
  13,996
  14,346
  14,705
  15,073
  15,449
  15,836
  16,231
  16,637
  17,053
  17,480
  17,917
  18,364
  18,824
  19,294
  19,776
  20,271
Total operating expenses, $m
  18,429
  19,094
  19,552
  20,047
  20,577
  21,144
  21,746
  22,384
  23,060
  23,772
  24,522
  25,289
  26,117
  26,987
  27,899
  28,855
  29,856
  30,904
  32,001
  33,147
  34,348
  35,601
  36,912
  38,281
  39,713
  41,209
  42,770
  44,403
  46,108
  47,888
  49,749
Operating income, $m
  1,197
  925
  927
  958
  1,018
  1,107
  1,223
  1,367
  1,539
  1,739
  1,968
  2,248
  2,537
  2,857
  3,210
  3,596
  4,017
  4,474
  4,970
  5,505
  6,081
  6,701
  7,367
  8,080
  8,844
  9,660
  10,532
  11,461
  12,452
  13,507
  14,630
EBITDA, $m
  4,150
  2,486
  2,524
  2,596
  2,701
  2,840
  3,011
  3,215
  3,452
  3,722
  4,027
  4,366
  4,741
  5,152
  5,602
  6,091
  6,622
  7,195
  7,813
  8,477
  9,190
  9,954
  10,772
  11,646
  12,578
  13,572
  14,630
  15,757
  16,955
  18,228
  19,581
Interest expense (income), $m
  321
  239
  253
  269
  286
  306
  328
  352
  379
  407
  438
  470
  506
  543
  583
  625
  670
  718
  769
  822
  879
  938
  1,001
  1,067
  1,137
  1,211
  1,289
  1,370
  1,456
  1,547
  1,642
Earnings before tax, $m
  973
  686
  674
  690
  732
  801
  895
  1,014
  1,160
  1,332
  1,530
  1,778
  2,032
  2,314
  2,627
  2,970
  3,346
  3,756
  4,201
  4,683
  5,203
  5,763
  6,366
  7,013
  7,706
  8,449
  9,243
  10,091
  10,996
  11,960
  12,988
Tax expense, $m
  285
  185
  182
  186
  198
  216
  242
  274
  313
  360
  413
  480
  549
  625
  709
  802
  904
  1,014
  1,134
  1,264
  1,405
  1,556
  1,719
  1,893
  2,081
  2,281
  2,496
  2,725
  2,969
  3,229
  3,507
Net income, $m
  614
  500
  492
  503
  534
  584
  653
  741
  847
  972
  1,117
  1,298
  1,483
  1,689
  1,918
  2,168
  2,443
  2,742
  3,067
  3,418
  3,798
  4,207
  4,647
  5,119
  5,626
  6,168
  6,747
  7,366
  8,027
  8,731
  9,481

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  3,125
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  26,395
  23,747
  24,293
  24,917
  25,618
  26,395
  27,247
  28,175
  29,179
  30,262
  31,423
  32,665
  33,991
  35,403
  36,903
  38,495
  40,182
  41,967
  43,856
  45,851
  47,958
  50,181
  52,525
  54,996
  57,600
  60,342
  63,229
  66,268
  69,466
  72,830
  76,369
Adjusted assets (=assets-cash), $m
  23,270
  23,747
  24,293
  24,917
  25,618
  26,395
  27,247
  28,175
  29,179
  30,262
  31,423
  32,665
  33,991
  35,403
  36,903
  38,495
  40,182
  41,967
  43,856
  45,851
  47,958
  50,181
  52,525
  54,996
  57,600
  60,342
  63,229
  66,268
  69,466
  72,830
  76,369
Revenue / Adjusted assets
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
  0.843
Average production assets, $m
  15,086
  15,394
  15,748
  16,153
  16,607
  17,111
  17,663
  18,265
  18,916
  19,618
  20,370
  21,176
  22,035
  22,950
  23,923
  24,955
  26,048
  27,206
  28,430
  29,724
  31,090
  32,531
  34,050
  35,652
  37,340
  39,118
  40,989
  42,959
  45,032
  47,213
  49,507
Working capital, $m
  153
  -1,421
  -1,454
  -1,491
  -1,533
  -1,580
  -1,631
  -1,686
  -1,746
  -1,811
  -1,881
  -1,955
  -2,034
  -2,119
  -2,209
  -2,304
  -2,405
  -2,512
  -2,625
  -2,744
  -2,870
  -3,003
  -3,144
  -3,292
  -3,448
  -3,612
  -3,784
  -3,966
  -4,158
  -4,359
  -4,571
Total debt, $m
  7,008
  5,755
  6,106
  6,508
  6,958
  7,458
  8,006
  8,603
  9,248
  9,944
  10,691
  11,490
  12,342
  13,250
  14,215
  15,238
  16,323
  17,471
  18,685
  19,968
  21,323
  22,752
  24,260
  25,849
  27,523
  29,286
  31,142
  33,096
  35,153
  37,316
  39,591
Total liabilities, $m
  16,521
  15,269
  15,620
  16,022
  16,472
  16,972
  17,520
  18,117
  18,762
  19,458
  20,205
  21,004
  21,856
  22,764
  23,729
  24,752
  25,837
  26,985
  28,199
  29,482
  30,837
  32,266
  33,774
  35,363
  37,037
  38,800
  40,656
  42,610
  44,667
  46,830
  49,105
Total equity, $m
  9,873
  8,478
  8,673
  8,895
  9,146
  9,423
  9,727
  10,058
  10,417
  10,803
  11,218
  11,662
  12,135
  12,639
  13,174
  13,743
  14,345
  14,982
  15,657
  16,369
  17,121
  17,915
  18,751
  19,634
  20,563
  21,542
  22,573
  23,658
  24,799
  26,000
  27,264
Total liabilities and equity, $m
  26,394
  23,747
  24,293
  24,917
  25,618
  26,395
  27,247
  28,175
  29,179
  30,261
  31,423
  32,666
  33,991
  35,403
  36,903
  38,495
  40,182
  41,967
  43,856
  45,851
  47,958
  50,181
  52,525
  54,997
  57,600
  60,342
  63,229
  66,268
  69,466
  72,830
  76,369
Debt-to-equity ratio
  0.710
  0.680
  0.700
  0.730
  0.760
  0.790
  0.820
  0.860
  0.890
  0.920
  0.950
  0.990
  1.020
  1.050
  1.080
  1.110
  1.140
  1.170
  1.190
  1.220
  1.250
  1.270
  1.290
  1.320
  1.340
  1.360
  1.380
  1.400
  1.420
  1.440
  1.450
Adjusted equity ratio
  0.296
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357
  0.357

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  614
  500
  492
  503
  534
  584
  653
  741
  847
  972
  1,117
  1,298
  1,483
  1,689
  1,918
  2,168
  2,443
  2,742
  3,067
  3,418
  3,798
  4,207
  4,647
  5,119
  5,626
  6,168
  6,747
  7,366
  8,027
  8,731
  9,481
Depreciation, amort., depletion, $m
  2,953
  1,561
  1,597
  1,637
  1,683
  1,733
  1,788
  1,848
  1,914
  1,984
  2,059
  2,118
  2,204
  2,295
  2,392
  2,495
  2,605
  2,721
  2,843
  2,972
  3,109
  3,253
  3,405
  3,565
  3,734
  3,912
  4,099
  4,296
  4,503
  4,721
  4,951
Funds from operations, $m
  3,636
  2,062
  2,088
  2,141
  2,217
  2,317
  2,441
  2,589
  2,760
  2,956
  3,176
  3,415
  3,687
  3,984
  4,310
  4,664
  5,048
  5,463
  5,910
  6,391
  6,907
  7,460
  8,052
  8,685
  9,360
  10,080
  10,846
  11,662
  12,530
  13,452
  14,432
Change in working capital, $m
  -481
  -28
  -33
  -37
  -42
  -46
  -51
  -56
  -60
  -65
  -70
  -74
  -79
  -84
  -90
  -95
  -101
  -107
  -113
  -119
  -126
  -133
  -140
  -148
  -156
  -164
  -173
  -182
  -191
  -201
  -212
Cash from operations, $m
  4,117
  2,090
  2,121
  2,178
  2,259
  2,364
  2,492
  2,644
  2,820
  3,021
  3,246
  3,490
  3,766
  4,069
  4,400
  4,759
  5,149
  5,569
  6,023
  6,510
  7,033
  7,593
  8,192
  8,833
  9,516
  10,244
  11,019
  11,844
  12,722
  13,654
  14,644
Maintenance CAPEX, $m
  0
  -1,509
  -1,539
  -1,575
  -1,615
  -1,661
  -1,711
  -1,766
  -1,826
  -1,892
  -1,962
  -2,037
  -2,118
  -2,204
  -2,295
  -2,392
  -2,495
  -2,605
  -2,721
  -2,843
  -2,972
  -3,109
  -3,253
  -3,405
  -3,565
  -3,734
  -3,912
  -4,099
  -4,296
  -4,503
  -4,721
New CAPEX, $m
  -2,779
  -308
  -354
  -405
  -454
  -503
  -552
  -602
  -651
  -702
  -753
  -805
  -859
  -915
  -973
  -1,032
  -1,094
  -1,158
  -1,224
  -1,293
  -1,366
  -1,441
  -1,520
  -1,602
  -1,688
  -1,778
  -1,872
  -1,970
  -2,073
  -2,181
  -2,294
Cash from investing activities, $m
  -3,007
  -1,817
  -1,893
  -1,980
  -2,069
  -2,164
  -2,263
  -2,368
  -2,477
  -2,594
  -2,715
  -2,842
  -2,977
  -3,119
  -3,268
  -3,424
  -3,589
  -3,763
  -3,945
  -4,136
  -4,338
  -4,550
  -4,773
  -5,007
  -5,253
  -5,512
  -5,784
  -6,069
  -6,369
  -6,684
  -7,015
Free cash flow, $m
  1,110
  273
  228
  198
  189
  200
  229
  277
  343
  428
  531
  647
  789
  950
  1,132
  1,335
  1,560
  1,807
  2,078
  2,374
  2,695
  3,043
  3,420
  3,826
  4,263
  4,732
  5,236
  5,775
  6,353
  6,970
  7,628
Issuance/(repayment) of debt, $m
  -623
  317
  351
  401
  451
  499
  548
  597
  646
  696
  747
  799
  852
  908
  965
  1,024
  1,085
  1,148
  1,214
  1,283
  1,355
  1,429
  1,507
  1,589
  1,674
  1,763
  1,856
  1,954
  2,056
  2,163
  2,275
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -655
  317
  351
  401
  451
  499
  548
  597
  646
  696
  747
  799
  852
  908
  965
  1,024
  1,085
  1,148
  1,214
  1,283
  1,355
  1,429
  1,507
  1,589
  1,674
  1,763
  1,856
  1,954
  2,056
  2,163
  2,275
Total cash flow (excl. dividends), $m
  453
  590
  579
  600
  640
  699
  777
  873
  989
  1,123
  1,278
  1,446
  1,641
  1,858
  2,097
  2,359
  2,644
  2,955
  3,292
  3,657
  4,050
  4,473
  4,927
  5,414
  5,937
  6,495
  7,092
  7,729
  8,409
  9,133
  9,904
Retained Cash Flow (-), $m
  -515
  -160
  -195
  -223
  -250
  -277
  -304
  -331
  -359
  -386
  -415
  -444
  -473
  -504
  -536
  -568
  -602
  -637
  -674
  -712
  -752
  -794
  -837
  -882
  -929
  -979
  -1,031
  -1,085
  -1,142
  -1,201
  -1,263
Prev. year cash balance distribution, $m
 
  1,555
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,985
  384
  377
  390
  422
  473
  542
  630
  737
  863
  1,003
  1,168
  1,354
  1,561
  1,790
  2,042
  2,318
  2,618
  2,944
  3,297
  3,679
  4,090
  4,532
  5,007
  5,516
  6,061
  6,644
  7,267
  7,932
  8,640
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,904
  351
  328
  321
  327
  343
  366
  394
  423
  452
  476
  498
  515
  524
  526
  519
  504
  482
  453
  419
  381
  339
  297
  255
  215
  177
  143
  112
  87
  65
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

KT Corporation provides telecommunications service in Korea. The company offers mobile voice and data telecommunication services; fixed-line 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 Internet phone services. It also provides broadband Internet access services and other Internet-related services comprising including Internet protocol television (IPTV) services; data communications services consisting of leased line service and broadband Internet connection service to institutional customers; and credit card processing and other financial services, as well as sells mobile handsets. In addition, the company offers information technology and network services, such as consulting, designing, building and maintaining systems, and communication networks services; satellite TV services; and network services, such as cloud computing services. Further, it is involved in planning and development of commercial and office buildings and condominiums, as well as leasing of buildings; and development of media contents. As of December 31, 2015, it served approximately 18,038,000 mobile subscribers; and approximately 6.6 million IPTV subscribers. The company was formerly known as Korea Telecom Corp. and changed its name to KT Corporation in March 2002. KT Corporation was founded in 1981 and is headquartered in Seongnam, South Korea.

FINANCIAL RATIOS  of  KT ADR (KT)

Valuation Ratios
P/E Ratio 6.6
Price to Sales 0.2
Price to Book 0.4
Price to Tangible Book
Price to Cash Flow 1
Price to Free Cash Flow 3
Growth Rates
Sales Growth Rate 2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -8.4%
Cap. Spend. - 3 Yr. Gr. Rate -2.6%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 55.1%
Total Debt to Equity 71%
Interest Coverage 4
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 1.4%
Return On Total Capital 3.6%
Ret/ On T. Cap. - 3 Yr. Avg. 0.6%
Return On Equity 6.4%
Return On Equity - 3 Yr. Avg. 0.7%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 99.4%
Gross Margin - 3 Yr. Avg. 99.7%
EBITDA Margin 21.6%
EBITDA Margin - 3 Yr. Avg. 19.1%
Operating Margin 6.1%
Oper. Margin - 3 Yr. Avg. 3%
Pre-Tax Margin 5%
Pre-Tax Margin - 3 Yr. Avg. 0.7%
Net Profit Margin 3.1%
Net Profit Margin - 3 Yr. Avg. 0.3%
Effective Tax Rate 29.3%
Eff/ Tax Rate - 3 Yr. Avg. 27.3%
Payout Ratio 25.9%

KT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the KT stock intrinsic value calculation we used $19626 million for the last fiscal year's total revenue generated by KT ADR. The default revenue input number comes from 2016 income statement of KT ADR. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our KT stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for KT is calculated based on our internal credit rating of KT ADR, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of KT ADR.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of KT stock the variable cost ratio is equal to 45.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $9664 million in the base year in the intrinsic value calculation for KT stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.4% for KT ADR.

Corporate tax rate of 27% is the nominal tax rate for KT ADR. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the KT stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for KT are equal to 76.9%.

Life of production assets of 10 years is the average useful life of capital assets used in KT ADR operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for KT is equal to -7.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $9873 million for KT ADR - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 440.15 million for KT ADR is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of KT ADR at the current share price and the inputted number of shares is $7.3 billion.

RELATED COMPANIES Price Int.Val. Rating
SKM SK Telecom ADR 25.34 15.04  sell
DCM NTT DoCoMo ADR 23.38 16.15  sell
TLK Telekomunikasi 35.45 56.56  str.buy
CHT Chunghwa Telec 33.77 11.66  str.sell
PHI PLDT ADR 33.59 86.52  str.buy

COMPANY NEWS

▶ KT Corp filed its FY2016 Annual Report on Form 20-F   [May-23-17 10:24PM  PR Newswire]
▶ [$$] What JPMorgan's Telcos Guru Likes Right Now   [May-03-17 09:32PM  Barrons.com]
▶ Here Are 5 Ways to Profit From a Breakout Telecom Sector   [Jan-18-17 06:02AM  TheStreet.com]
▶ New Strong Sell Stocks for January 13th   [Jan-13-17 11:05AM  Zacks]
▶ Is HD Supply Holdings Inc (HDS) Worthy Of Your Portfolio?   [Dec-08-16 01:24PM  Insider Monkey]
▶ Is Crown Holdings, Inc. (CCK) A Good Stock To Buy?   [Dec-01-16 12:19PM  Insider Monkey]
▶ Is Crown Holdings, Inc. (CCK) A Good Stock To Buy?   [12:19PM  at Insider Monkey]
▶ What Smart Money Thinks about Qorvo Inc (QRVO)?   [11:11AM  at Insider Monkey]
▶ What Hedge Funds Think about South Korean ADRs   [Jul-31-16 05:05PM  at Insider Monkey]
▶ KT CORP Financials   [01:04PM  EDGAR Online Financials]
▶ 6 things to know about Axium Healthcares new Lake Mary HQ   [Feb-08-16 03:05PM  at bizjournals.com]
▶ Kakao, KT Corp Jump: To Open Korea's First Internet Banks   [Nov-29  09:48PM  at Barrons.com]
▶ South Korea August Exports Flash Global Trade Warning   [Sep-01  05:00PM  at Investor's Business Daily]
▶ NEC and KT to Collaborate on 5G Networks   [Aug-05  11:33PM  ACN Newswire]
▶ ZTE and KT Sign Strategic Partnership on 5G in Korea   [Jul-16  01:11AM  Business Wire]
▶ Monday interview: Hwang Chang-gyu, KT chief executive   [May-03  09:05AM  at Financial Times]
▶ Korea's Telcos to Dial Up Earnings, Dividends   [Apr-22  12:01AM  at Barrons.com]
Stock chart of KT Financial statements of KT
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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