Causeway Capital Management remains bullish on Kia Corp (KRX: 000270) despite the ongoing political uncertainty.
In fact, shares of the automotive giant are its largest active South Korean holding at writing.
President Yoon Suk Yeol declared an emergency martial law in South Korea last week that the country’s lawmaker voted to overturn within a matter of hours.
While the episode sure was frustrating for investors, a lot of the related negativity as well as risks are already baked into the South Korean market, as per Arjun Jayaraman – Causeway’s portfolio manager.
Kia stock is currently down more than 25% versus its year-to-date high in June.
Kia stock is more export-oriented
Arjun Jayaraman continues to see South Korean stocks as inexpensive to own at current levels.
He’s particularly bullish on Kia as he sees the automaker as somewhat insulated from the country’s political turmoil.
Why? Because it’s an export-oriented company that drives most of its business from the US and other parts of the West, Jayaraman argued in an interview on Tuesday.
He expects Kia stock to benefit if “we see continued weakness in the Korean won” especially against its Japanese rivals where the yen has been inching up against the US dollar in recent weeks.
Kia shares are trading at a discount
Kia shares have lost more than 25% over the past six months that Causeway’s Jayaraman dubs an opportunity to buy a quality name at a deep discount.
Shares of the South Korean automaker may be worth owning also because it’s fully committed to emerging as a global leader in electric vehicles.
In the meantime, the company’s gas-powered vehicles remain a lot more profitable than what the investors have come to expect from the automotive industry at large.
Additionally, Kia stock pays a rather healthy dividend yield of 5.85% at writing that makes it even more appealing for those interested in generating sustainable passive income over the long term.
Kia to improve shareholder value
Kia stock is exciting to own at current levels as its fundamentals remain solid as well.
In October, the car manufacturer said its operating profit and sales climbed to an all-time high in its third financial quarter.
Kia also improved its guidance for the full year at the time.
The automaker expects its operating profit to print at over 13 trillion won ($9.1 billion) in 2024.
Kia now forecasts up to 110 trillion won of sales this year versus its previous estimate of 101 trillion won.
By the end of 2024, Kia will cancel its “remaining 50% of the KRW 500 billion treasury stock it acquired in H1 of this year, fulfilling its commitment to enhance shareholder value,” as per the company’s recent press release.
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