Capital Group Secures Notable 5.61% Shareholding in KTG as Stocks Soar Past KRW 180,000

In a significant move reflecting its confidence in the South Korean market, Capital Group Companies, Inc., a prominent financial management firm based in the U.S. with assets exceeding $3 trillion, has acquired a 5.61% stake in KT&G (KRX033780), South Korea's preeminent tobacco manufacturer. This acquisition comes at a pivotal time when KT&G's share price has surpassed the landmark figure of KRW 180,000, marking a high point in the company's stock performance.

The announcement was made in line with South Korean regulations requiring investors holding more than 5% of a firm's equity to report their holdings within five days to relevant financial authorities, such as the Financial Services Commission. This measure is intended to ensure transparency in ownership and changes regarding publicly listed companies.

Capital Group now joins a roster of foreign investors who have amassed substantial stakes in KT&G. Earlier in the year, BlackRock disclosed a 5% interest in the company, and they are now accompanied by other notable shareholders like First Eagle Investments and GIC, the sovereign wealth fund of Singapore.

Recent reports indicate that foreign investors have maintained a streak of net buying activity concerning KT&G shares for 19 consecutive trading days leading up to May 7, suggesting a growing optimism about the company’s future. It is estimated that international investors have acquiried around 800,000 shares valued at approximately 140 billion KRW (equivalent to 100 million USD) during this period.

The upward trend in KT&G’s stock price was notably buoyed by the company’s robust quarterly earnings announcement during its investor relations meeting held on May 7. KT&G reported its Q1 revenue at a staggering 1.7036 trillion KRW with an operating profit of 364.5 billion KRW, both figures reflecting year-on-year increases of 14.3% and 27.6% respectively. This is a testament to the strength of its overseas business, particularly in combustible cigarettes, which was a key contributor to this financial performance.

The company's global cigarette revenue surged by 24.6% compared to the previous year, achieving 559.6 billion KRW. The operating profit also saw an impressive growth of 56.1% year-on-year driven by reduced costs and SGA expenditures.

Encouraged by the solid performance of their core operations, KT&G has set ambitious targets for the year 2026, aiming for consolidated revenue growth of 3-5% and an operating profit increase of 6-8%. They plan to further diversify their business models, particularly within the overseas market for combustible cigarettes, through strategies such as OEM production and licensing agreements, which are expected to yield significant returns.

During this press event, KT&G's Chief Financial Officer, Sang-hak Lee, shared insights into the company’s optimistic outlook despite the backdrop of geopolitical uncertainties affecting the Middle East. He emphasized that KT&G has witnessed consistent revenue growth across various regions including Asia-Pacific, Eurasia, and emerging markets. The company is confident in sustaining its growth trajectory within the global cigarette industry.

Furthermore, to enhance shareholder value, KT&G is also poised to introduce new shareholder return policies including dividend reinforcements in light of their expanding international business performance. This is indicative of KT&G's commitment to return capital to its investors while navigating the complexities of a rapidly evolving market landscape.

As KT&G continues to solidify its position in the global tobacco sector, the backing from substantial institutional investors like Capital Group not only serves as a positive endorsement but also signals the potential for continued growth and profitability in the coming years as the company strategically adapts to market demands and expands its operations.