SEOUL, KOREA - Shinyoung Securities said on April 21 that the first-quarter performance of Cheil Communications would be higher than expected, while keeping its investment opinion and target price on the stock unchanged at "buy" and 28,000 won. Han Seung-ho, Shinyoung Securities analyst, predicted that the Samsung Group ad agency's first-quarter sales revenue and net profit would be 606.4 billion won and 13.6 billion won, respectively, up 7.5 percent and 4.6 percent from a year ago.

 

The analyst added, "Despite the worries that Samsung Electronics may cut down on its marketing expenditures, the first-quarter performance of Cheil Communications is likely to surpass the market consensus. Especially the Chinese unit that it took over in 2009 has improved its financial performance rapidly, which will likely to contribute to the parent company's bottom line. In the latter half last year, Cheil Communications increased its equity stake in the Chinese unit to 98.05 percent from 58.33 percent.

 

According to Han of Shinyoung Securities, the Chinese agency's average annual growth rate for sales revenue and net profit for the five-year period from 2009 to 2013 was 60.8 percent and 70.5 percent respectively. Meanwhile, he said, the parent company's share price is hovering around the current level for weeks. "It seems to be because of the concerns over its biggest client Samsung Electronics cutting down on the marketing spending budget. But this is the time an investment strategy that turns problem into opportunity is called for," he said.