[Click eStock] "Korea Capital, Mid-to-Long-Term Growth Expected Through New Business Entry"

[Asia Economy Reporter Yoo Hyun-seok] KB Securities analyzed on the 30th that Korea Capital is expected to secure mid- to long-term growth drivers through new business ventures such as the rental industry and the used car finance market. No investment opinion or target price was provided.

Korea Capital operates financial businesses including corporate finance, lease finance, and retail finance in accordance with the Specialized Credit Finance Business Act. In the third quarter, it recorded a net interest income of 31.2 billion KRW and an operating profit of 11.5 billion KRW, representing increases of 10.1% and 85.0% respectively compared to the same period last year. The cumulative performance for the third quarter has surpassed last year's results.

KB Securities explains that attention should be paid to the improvement in Korea Capital’s performance and credit rating. KB Securities researcher Lim Sang-guk stated, "Stable business expansion is expected due to portfolio weight adjustment and an increase in the funding limit from the Military Mutual Aid Association. The portfolio is diversifying from the existing lease finance-centered portfolio to corporate finance and retail finance," adding, "The parent company, the Military Mutual Aid Association’s funding limit has been raised to 500 billion KRW (previously 300 billion KRW)."

He said, "It is expected that funding costs will decrease and operating profit will expand due to the credit rating upgrade," and added, "On the 27th, Korea Capital’s unsecured bond credit rating was upgraded from A- to A." He further evaluated, "The credit rating upgrade effectively lowers the borrowing rate by about 40 basis points, which means that if 1 trillion KRW is raised, cost savings of approximately 4 billion KRW are possible."

He emphasized, "Mid- to long-term growth drivers are expected through new business ventures such as the rental industry and the used car finance market," and added, "The rental business and used commercial vehicle business started last year, and the used passenger car business is expected to expand significantly from next year."

Along with this, shareholder value enhancement measures are also anticipated. He explained, "As of the first half of the year, ROE is 11.3%, and the dividend yield based on the current stock price is 4.1%, increasing expectations for shareholder value enhancement and stock price revaluation."