The author is an analyst for NH Investment & Securities. He can be reached at yd.yoon@nhqv.com -- Ed.
We expect Samsung Securities to emerge as a high dividend large-cap stock, foreseeing 2023 DY of 7.2%. Despite difficult industry conditions, stable earnings should continue over 2023~2024 on outstanding asset management. We anticipate a share price rebound both at yearend and after the ex-dividend date. Samsung Securities remains our second-preferred pick.
Outstanding asset quality
Maintaining a Buy rating, we raise our TP on Samsung Securities from W44,000 to W46,000. As the health of its PF business and overseas investment assets is better than feared, the firm has limited need for provisioning or the writing off of non-performing loans compared to peers. We hike 2023E and 2024F BPS.
With yearend approaching, interest is rising toward financial stock dividends. Considering the company’s guidance (minimum DPR of 35%), we size 2023 DY at 7.2%. In line with the recent trend of emphasizing shareholder return, as well as the firm’s long history of care regarding shareholder value, we advise keeping Samsung Securities in mind.
Carefully expanding IB operations
We estimate Samsung Securities’ 3Q23 NP (excluding minority interest) at W156.8bn (+27.0% y-y, +3.5% q-q).
At the IB division, new PF deals are gradually flowing in. Although there is uncertainty about the real estate market, it is assumed that Samsung Securities is selecting quality deals with an eye toward long-term profit generation. We note that the company’s PF exposure is limited at approximately W2.4tn, and the majority of necessary provisioning is believed to have been set aside in 2022 and 1H23. Little additional provisioning is expected related to the firm’s current PF exposure.
Brokerage-related profits should also arrive solid in 2H23, in line with an uptick in domestic average daily transaction volume from W21tn in 2Q23 to W23tn in 3Q23. In terms of overseas stock transactions, the change in market size has been minimal (from W1.8tn in 2Q23 to W1.9tn in 3Q23). Although its market share has slipped slightly due to the marketing strategies of its peers, as Samsung Securities still ranks high, we see little need for concern.