Promissory Note Issuance Proposal Approved
The author is an analyst of NH Investment & Securities. He can be reached at junsup@nhqv.com. -- Ed.
Mirae Asset Securities reported 1Q20 NP close to its historic-high level, and the firm’s promissory note issuance proposal has been approved. The company’s valuations are appealing as its shares price has risen less than peers.
Raise TP to W13,100
We raise our TP on Mirae Asset Securities from W10,500 to W13,100 to reflect an increase in our income estimate (2021E EPS +13.9%) thanks to: 1) the sound stock market environment; 2) decreased risk from overseas investment; and 3) likely promissory note issuance income from 2022. Our new TP is derived by applying a target P/B of 0.82x to 2021E BPS of W15,963.
We also upgrade our rating from Hold to Buy on: 1) greater upside to our TP; 2) decreased valuation burden from a recent share price slump; and 3) the approval of the firm’s promissory note issuance proposal.
Set to become fourth promissory note issuer
On May 4, the Securities and Futures Commission (SFC) passed Mirae Asset Securities promissory note issuance proposal. If the Financial Services Commission (FSC) grants final approval, Mirae Asset Securities will become the fourth promissory note issuer, following KIS, NHIS and KB Securities.
Mirae Asset Securities will be able to fund a maximum of W18.2tn with promissory notes, twice its shareholders’ equity. After the firm starts its promissory note business, its revenue will increase significantly. Of note, we assume: 1) a promissory note margin of 150bp; and 2) issuance balance of W2tn at end-2021 and W6tn at end-2022.
1Q21 NP of W291bn (+170.1% y-y)
Mirae Asset Securities reported 1Q21 NP of W291.2bn, surpassing consensus and our forecast. All businesses performed strongly, especially the brokerage (W230.5bn, +85.8% y-y), investment (dividends of W125bn, +17.8% y-y), and overseas (W69.2bn, +56.6% y-y) businesses.