SEOUL: So far, 2026 has been as good as it gets for South Korea’s benchmark Kospi, with investors piling into chipmakers and artificial intelligence (AI)-driven data centre plays.
But outside the AI trade, few stocks have attracted as much attention as Korea Tobacco & Ginseng (KT&G).
Foreign ownership of the tobacco maker recently exceeded 50% for the first time in seven years as its shares climbed to a record 190,000 won.
This was up from a 52-week low of 119,200 won.
With foreign ownership now on par with SK Hynix and surpassing Samsung Electronics, KT&G’s rise poses a question: what are global investors seeing in the tobacco maker?
Foreign ownership in KT&G climbed to 51.1% from 42.8% at the start of the year.
As of last Friday, foreign investors purchased roughly one million KT&G shares over the past month, bringing their net purchases this year to about 2.4 million shares.
First Eagle Investment Management held an 8.6% stake, while Singapore sovereign wealth fund GIC owned 6.1%.
BlackRock increased its stake above 5% earlier this year, while Capital Research and Management, part of Capital Group, raised its holding to 5.6% from 4.4%.
The foreign buying, industry officials said, stemmed from a confluence of earnings momentum and shareholder returns, with booming overseas tobacco sales at the core.
Since resuming buybacks in 2020, KT&G has steadily ramped up capital returns.
From 2023 through this year, KT&G has cancelled 33.48 million shares.
In April alone, it retired 10.87 million treasury shares, equivalent to 9.5% of its outstanding shares, surpassing its original target of reducing its share count by 20% by 2027.
Having largely completed the buyback phase of its capital return programme, KT&G is now expected to pivot towards dividends.
The company has signalled it will unveil a new shareholder return framework in the second half of the year, with the market broadly anticipating a more generous dividend policy.
“The completion of KT&G’s overseas cigarette factories has reduced capital expenditure needs,” said an analyst at Kiwoom Securities.
The analyst added that the company now had greater room for higher dividends and further gains in corporate value.
Last year, KT&G set an annual dividend of 6,000 won per share, up 600 won from the prior year, with total shareholder returns exceeding 100% of net income.
“We will continue to enhance both corporate and shareholder value through stronger dividend policies and other return measures,” a KT&G spokesperson said.
The attraction is not merely financial engineering in that KT&G is delivering some of the strongest operating results yet.
First quarter revenue came in at 1.7 trillion won, with operating profit of 364.5 billion won, up 14.3% and 27.6%, respectively, from a year earlier.
Overseas cigarette revenue rose 24.6% year-on-year to 559.6 billion won, while overseas operating profit surged 56.1%.
Overseas operations accounted for more than 57% of KT&G’s tobacco revenue, with sales volumes rising across key regions including Asia-Pacific and Eurasia.
Next-generation products continue to gain momentum, posting 51% year-on-year revenue growth across domestic and international markets.
“With new factories coming online in Kazakhstan and Indonesia, KT&G is expected to produce more than 50% of its overseas sales volumes locally by 2026, which should lower production and logistics costs and improve profitability,” an analyst at Hanwha Investment & Securities said. — The Korea Herald/ANN
