The author is an analyst for NH Investment & Securities. He can be reached at junsup@nhqv.com -- Ed.
Mirae Asset Life’s share price is moving strong in response to majority shareholders’ share purchasing activity. However, it is unclear as to how long these purchase effects will last.
Share price energized by major shareholders’ share purchases
Mirae Asset Life affiliates are continuing to buy up shares in the insurer. Shareholding ratio (including convertible preferred stocks) for its major shareholders (which include securities, capital, asset management, and consulting players) upped from 43% at end-2022 to 48% on Dec 6, 2023. If including treasury shares (34%), the figure reaches a whopping 82%. With major shareholders continuing to scoop up shares, some are mentioning the possibility of a complete subsidiary being created via delisting, but the company itself is denying such a possibility.
We raise our TP from W4,300 to W5,100. Outshining downward revisions to our earnings estimates is a reduction in discount rate (60% → 40%) in reflection of an ongoing series of share purchases by major shareholders. Given that average daily trading volume was around W1bn prior to start of the recent purchasing activity, supply-demand events are bound to have a significant impact on share price.
However, we adhere to a Hold rating for now, noting: 1) valuation appeal is less than that for rivals (2024E P/Es: 4.6x for Mirae Asset Life versus 2.9x for Hanwha Life and 3.0x for Tongyang Life); 2) dividend attractiveness is modest at this juncture; and 3) the recent share grabs by major shareholders are related only to supply-demand effects, not shareholder return, and it remains to be seen how long this purchasing activity will last.
Factors needed to justify current valuation
Putting aside supply-demand events, we believe that in order to justify the company’s current relatively overvalued valuation, it will be necessary to: 1) present a specific shareholder return policy and DY level on a par with or higher than that for competitors; and 2) show visible improvement in terms of new contract and contractual service margin (CSM) performance. However, both of these factors have yet to be confirmed clearly.