Special Dividend Payments from Samsung Electronics
The author is an analyst of KB Securities. He can be reached at cygun101@kbfg.com. -- Ed.
Maintain BUY and raise target price to KRW250,000
We maintain BUY and raise our TP by 2.0% to KRW250,000 for Samsung F&M because we expect: (1) 1Q21 earnings to beat the market consensus, with special dividend income coming from Samsung Electronics as well as profits from the disposal of beneficiary certificates, and (2) Samsung F&M to implement stable capital policy, based on its relatively high RBC ratio amid a market rate uptrend. Apart from expansion of domestic market share and improvement in loss ratio, market participants hope to see Samsung F&M, the market’s top player, enhance its profit-generating capacity by differentiating competitiveness via: (1) new growth engines at home and abroad, and (2) differentiated capital policy and aggressive investment strategies (high RBC ratio). In particular, we hope to see China approve the JV with Tencent this year.
1Q21E standalone NP of KRW350.1bn above market consensus by 23.2%
We revise up 1Q21E standalone NP by 5.1% to KRW350.1bn. To reflect this, we lift 2021E standalone NP by 4.7% to KRW904.8bn. Our TP is based on a target multiple of 0.66x (5.2% sustainable ROE; COE: 7.2%→6.9%; g: 1.95%) and 12m fwd BVPS of KRW393,167.
Special dividend payments from Samsung Electronics
1Q21E standalone NP of KRW350.1bn represents a 113.4% YoY increase, at 23.2% above the market consensus. The stellar profit growth should come from: (1) special dividend income from Samsung Electronics (KRW140.0bn), (2) profit from the disposal of beneficiary certificates on the back of the rising stock market, and (3) sound underwriting performance (-2.3pp in combined ratio). We expect: (1) 1Q21 loss ratio to improve 1.6pp YoY to 81.8% (auto loss ratio and long-term loss ratio at -4.5pp and -0.2pp, respectively); (2) new contracts for personal insurance to drop 28.0% YoY, resulting in a 0.8pp improvement in operating expense ratio; and (3) investment yield to increase 58bp YoY to 3.3% thanks to the influx of dividends from Samsung Electronics as well as income from the disposal of beneficiary certificates.