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| An inspector looks at the ruins of a collapsed roof in a parking garage at an apartment complex in Incheon. Yonhap |
By Lee Min-hyung
Shares of GS Engineering & Construction (GS E&C) fell sharply Thursday after the company announced its decision to completely rebuild an apartment complex after a collapse in an underground parking garage.
The stock price of the construction company extended a loss of more than 19.47 percent following GS' overnight announcement that it would demolish all 17 apartment buildings and rebuild them from scratch.
The company is feared to suffer serious financial losses of hundreds of billions of won. It will also take some time for the company to recover its tainted corporate image. Market analysts expected the company to face volatile stock adjustments until the land ministry releases the results of its ongoing investigation into the case sometime in August.
"GS E&C is estimated to lose 340.3 billion won ($261.46 million) for the reconstruction, and this will result in a drop of 53 percent in its operating profit this year," Korea Investment & Securities analyst Kang Kyung-tae said. "The firm has so far maintained a dividend payout ratio of around 30 percent, but it appears unclear whether the company will be able to continue the policy following the incident."
Samsung Securities also revised the GS affiliate's target stock price down to 22,000 won per share from 30,000 won. GS shares closed at 14,520 won on Thursday.
"The company will face escalating uncertainties until the results of the investigation are released and the level of penalty is confirmed by the authority next month," said Baek Jae-seung, an analyst at the brokerage house.
It will take around five years for GS E&C's Xi-branded apartment complex in Incheon's Geomdan, west of Seoul, to finish its reconstruction. While announcing the decision, the company also issued a public apology, pledging to compensate those who planned to move into the complex.
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