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I N V E S T M E N T S U M M A R Y
Top pick – Mirae Asset Securities
We maintain our NEUTRAL rating on the securities sector due to intensifying
competition in the brokerage business under a deregulatory environment without
significant trading value improvement. We believe a deregulatory environment will
negatively affect the sector in the short term due to more competition in the existing
business area (especially the brokerage business) as the regulator plans to lower entry
barriers to the sector. In the longer term, we are positive on the sector with expectation
more business opportunities in investment banking and asset management, but we
believe this positive is already priced into the shares of several companies.
We believe only securities companies that have diversified revenue sources, strong
affiliates and customer loyalty will survive. We recommend focusing only on companies
whose revenue is well-diversified to asset management and investment banking. Mirae
Asset remains our top pick in the sector due to its well-diversified revenue, its
structural-growth outlook and high customer loyalty.
Mirae Asset Securities (BUY; TP: KRW180,000)
Mirae Asset Securities is our top pick in the sector based on the following factors: 1)
increasing fund-sale fees and rising brokerage market share on the back of its strong
asset-management affiliate’s – Mirae Asset Investment Management (the largest
equity investment manager in Korea) – increasing assets (assets under management
of KRW54.4t, up 151% y-y in March); and 2) organic growth through branch expansion,
to give it a leading position in customer loyalty in the retail market.
We believe the recent sluggish trend after a sharp correction in Mirae’s share price
already reflects investor concerns on principal investment losses in 4QFY08. We
believe the current share price looks attractive considering its structural growth outlook
and its dominant position in the expanding asset-management business. We reiterate
our BUY recommendation with a target price of KRW180,000, implying 19x FY09E P/E
with 20.5% ROE (3.6x FY09E P/BV).
Korea Investment Holdings (BUY; TP: KRW72,000)
We recommend a BUY on KIH because: 1) it holds 100% ownership of Korea’s leading
asset-management companies (Korea Investment Trust and Korea Value Asset
Management, combined 33% y-y AUM growth for the those companies; 2) welldiversified
revenue sources, from its brokerage business to interest income (Exhibit 1).
The shares are trading at an FY09E P/BV of only 1.2x (26% discount to the sector),
and our target price is based on 1.6x FY09E P/BV (11.8x FY09E P/E).
Daewoo Securities (HOLD; TP: KRW23,000)
We believe the current share price (1.9x P/BV) reflects most of its fundamentals and
M&A expectations with regard to the Korea Development Group. Although we expect
revenue growth due to KDB’s plan to immigrate its IB business to Daewoo Securities,
a decline in brokerage business commissions because of competition without
improving market trading value will lower overall profitability of the company. We
maintain our HOLD recommendation with a target price of KRW23,000, which
translates into 1.8x FY09E P/BV with ROE of 14.3% (13.1x P/E).
Contents
Top pick – Mirae Asset Securities ................................................................................. 3
Mirae Asset Securities (BUY; TP: KRW180,000) 3
Korea Investment Holdings (BUY; TP: KRW72,000) 3
Daewoo Securities (HOLD; TP: KRW23,000) 3
Woori Investment & Securities (HOLD; TP: KRW24,000) 4
Samsung Securities (REDUCE; TP: KRW57,300) 4
Preview and review of 4QFY08 earnings ...................................................................... 6
Implications of deregulation........................................................................................... 9
Lower entry barriers to the industry 9
More desire for M&A in the sector 11
Banks ask to enter securities business 11
Healthy liquidity conditions 11
Outlook in FY09 13
Company updates ....................................................................................................... 17
Mirae Asset Securities 18
Korea Investment Holdings 23
Daewoo Securities 28
Woori Investment & Sec 32
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