Kumho Tire tipped to exit workout programme this year

Korea Investment & Securities anticipates that a continually improving financial position at Kumho Tire makes the company good value for investors. In comments published by English-language Korean ICT publication IT Times, analyst Kim Jin-woo said the tyre maker’s debt burden is falling rapidly, and he opines that this financial turnaround isn’t yet reflected in the current Kumho Tire share price. Kumho Tire thus has been given a “buy” recommendation by Korea Investment & Securities and the target share price has been set at KRW 16,000.

“With the redemption of the bonds with stock purchase warrants and convertible bond conversion, its consolidated debt ratio is expected to decline to 288 per cent this year from 765 per cent in 2011,” said Kim. “During the same period, the interest coverage ratio will rise to three times from one time.”

Kim added that growing domestic market share and capacity utilisation will further boost Kumho Tire’s financial position. He estimated that net profit will increase 123 per cent, and expressed optimism about the company’s ability to graduate from its debt workout programme in 2014. It entered debt restructuring along with Kumho Industrial at the end of 2009.