Net profit expected to come in 22% below expectations... Korea Investment Holdings target price lowered

[Financial News] Yuanta Securities Korea lowered its target price for Korea Investment Holdings from 340,000 won to 317,000 won, reflecting an earnings slowdown caused by weak stock-market conditions and reduced trading value. However, it maintained its 'Buy' rating, saying the expected dividend yield for this year exceeds 6% and that the stock still has sufficient upside from its current price.
Do-hyung Woo, an analyst at Yuanta Securities Korea, explained on the 10th, "We lowered our return on equity (ROE) forecast after revising our assumption for average daily trading value for the year." He added, "Korea Investment Holdings posted earnings surprises in the first and second quarters based on its solid management capabilities, but in the third and fourth quarters, we need to assess its ability to defend earnings amid unfavorable stock-market conditions."
Yuanta Securities Korea forecast Korea Investment Holdings' net income attributable to controlling shareholders at 539.3 billion won for the third and fourth quarters. This would represent a 20.0% decrease from the same period a year earlier and a 45.9% decline from the previous quarter, while also coming in 22.5% below the market forecast of 696.2 billion won. Operating profit was also projected at 684 billion won, 24.1% below the market estimate.
The decline in trading value was cited as the main cause of the earnings slowdown. "As market trading value falls, Korea Investment & Securities' brokerage commissions are expected to decrease 39.2% from the previous quarter," Do-hyung Woo said. "Income from asset management is also expected to fall 76.6% due to reduced revenue related to target-conversion wraps." By contrast, interest income related to brokerage was expected to rise 1.2% as its market share in margin lending increased, while trading and product gains were projected to grow 20.4% due to a seasonal increase in dividends.
The analyst assessed the dividend appeal as still strong. Yuanta Securities Korea forecast Korea Investment Holdings' dividend per share (DPS) at 13,000 won this year, with an expected dividend yield of 6.7%. It also analyzed that the company had met the requirements for separate taxation of dividend income after its total dividend payout increased 118.2% from the previous year.
The planned acquisition of KDB Life Insurance was cited as a factor that could increase share-price volatility going forward. "Korea Investment Holdings was selected as the preferred bidder for KDB Life Insurance and is pursuing the acquisition of the insurer," Do-hyung Woo said. "Share-price volatility could increase depending on the amount of capital invested if the insurer is acquired in the future."   

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