Korean Securities Firms
Local brokerage firms’ prediction capabilities have become an object of criticism as Samsung Electronics came up with disappointing earnings results for Q2. They criticized JP Morgan, which expressed concerns over Samsung’s quarterly sales and recommended investors to sell shares in a report published last month, only to see they were correct in the end.
| Period | Estimate | Actual Figure | Difference |
|---|---|---|---|
| Q2 2011 | 3.6 | 3.8 | 0.2 |
| Q3 2011 | 3.3 | 4.3 | 1.0 |
| Q4 2011 | 4.5 | 4.6 | 0.1 |
| Q1 2012 | 4.9 | 5.6 | 0.7 |
| Q2 2012 | 6.5 | 6.4 | -0.1 |
| Q3 2012 | 7.5 | 8.0 | 0.5 |
| Q4 2012 | 8.3 | 8.8 | 0.5 |
| Q1 2013 | 8.5 | 8.7 | 0.2 |
| Q2 2013 | 10.2 | 9.5 | -0.7 |
According to financial data provider FnGuide, 20 of the 25 major securities companies in Korea forecast that Samsung Electronics’ operating profits would surpass the 10 trillion won mark for the second quarter of this year. However, it has turned out that their estimates missed the mark by at least 500 billion won when compared to the actual earnings record made available on July 5.
Hana Daetoo Securities, whose estimate was 9.5 trillion won, recorded the highest accuracy among the 25 companies. It was followed by Hyundai Securities, Hanwha Securities, Shinyoung Securities, Mirae Asset Securities and Taurus Investment & Securities, all of which showed a gap of less than 300 billion won. Meanwhile, approximately 80% of firms, including the largest ones in the country, predicted that Samsung Electronics’ quarterly operating earnings would exceed 10 trillion won.
However, foreign brokerage houses’ concerns over the company’s Q2 performance have proven to be well-founded. The estimate of JP Morgan, which jolted the local stock market with its report last month, was 9.7 trillion won, with that of Goldman Sachs’ being 100 billion won less.
Both securities companies at home and abroad care greatly about the price of Samsung Electronics shares as the manufacturer is number one in Korea in terms of market capitalization. Therefore, their stock price forecasts have showed a significant gap on just a few occasions during the past two years or so. In that period, Samsung Electronics has reported higher-than-expected earnings results or those similar to the brokerage firms’ estimates in most cases.
Stock market analysts are claiming that the wide gap this time can be attributed to excessive expectations for the Galaxy S4. “It seems that the high specifications of the Galaxy S4 have resulted in an increase in raw material costs and marketing expenditure, which in turn have led to lesser earnings than expected,” one of them remarked, adding, “In short, we anticipated too much perhaps.”