Korea Land Trust Expected to Improve Earnings in Second Half; Target Price Maintained at 1,800 Won

[Financial News] Shinhan Investment & Securities set a target price of 1,800 won for Korea Land Trust, saying its earnings improvement is expected to gain momentum in the second half of the year. This represents 52.5% upside from the current share price of 1,180 won.
On the 2nd, Kim Sun-mi, a researcher at Shinhan Investment & Securities, said, "Although first-half earnings were disappointing, the potential for medium- to long-term earnings growth remains valid, considering the recovery in presale rates, increased urban redevelopment orders, and diversified revenue structure through participation in an anchor REIT." She added, "The share price is also expected to rise gradually alongside the earnings improvement."
Kim said, "Second-quarter operating revenue was 55.2 billion won, up 38% from the same period a year earlier, while operating profit rose 10% to 4.4 billion won." She explained, "In the first half, revenue recognition was slow because of low initial presale rates at projects scheduled for presales in 2025 and 2026, while one-off expenses, including investment losses at consolidated subsidiary Koreit, were also reflected."
She continued, "Presale rates at projects have been recovering smoothly since the second quarter, and the average presale rate in the second half is expected to rise to around 60%." She forecast, "The start of construction on major urban redevelopment projects, including Heukseok and Singil, in the third quarter, along with increased fee income from the REIT division’s asset acquisition and disposal plans, will also contribute to earnings improvement."
Despite weak orders for loan-type trusts, Kim expected Korea Land Trust to secure more than 100 billion won in urban redevelopment orders this year. She also forecast that the anchor REIT established in August could generate 3 billion won in annual management fees, as well as asset acquisition and management fees from investments in subsidiary REITs and an equity investment return of around 9% to 10%.
She added, "By diversifying its revenue structure through the anchor REIT, the company is laying the foundation for reducing earnings volatility caused by market conditions." She further stated, "The valuation discount is also expected to gradually narrow alongside the earnings improvement."
Shinhan Investment & Securities estimated Korea Land Trust’s operating revenue this year at 233.9 billion won and operating profit at 35 billion won. It forecast that the company will post operating revenue of 261.8 billion won and operating profit of 50.5 billion won in 2027.

[email protected] Kang Jung-mo Reporter