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Saturday, July 16, 2011

Posco (PKX) and Korean stocks

A quick look at Posco (sec).  Basically, I'm looking at the Korea Fund as a possible investment.  I don't have any easy way to get into the Korean market other than a few high profile stocks like Posco, so this is not a bad alternative.  I've looked at the Korea Fund's holdings and they make sense.  The various Samsung companies, Hyundai, Lucky Goldstar (now known as LG), Posco, and others.

I've looked at this company (POSCO) long ago when Buffett took a stake in it.  I want to get a sense for the P/E ratio of the stock right now.  77 million shares at the end of 2010.

Revenues:  (in trillions of Won)
2006: 26
2007: 32
2008: 42
2009: 37(downturn)
2010: 61 (wow!)  This is US$53 billion

Earnings have followed along with revenues almost.  2006 had 13% net margin.  2010 had 7.2%.

Debt to equity ratio has been rising over the years.

In 2010, they earned US$49.47 per share.  The stock is selling for $109.  So the P/E is roughly around 2.  This is probably misleading because the steel industry is very volatile.  But still, it's priced for a major drop in the steel industry.  Everyone knows China has been overbuilding.  Are they still overbuilding?

Korea Electric Power Corporation

20-F for 2010
Oops, they've been losing money for 3 years.  Just looking at the revenues and income going back to 2006, I'd guess a reasonable stock price would be ten dollars.  It's selling for $12.91.  I didn't cheat, really!

So that stock isn't selling cheap.


The Korea fund claims the forward (ok, if you have a time machine, why don't you just tell us the future stock prices... actually just tell me) P/E ratio for the fund is 10.43 as of June 30 (it closed at $49.27 and the current price is $50).  That's twice the price that Yahoo is showing.

It's not a bad investment at this price, but I'd rather find something cheaper if possible.

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