[Funding] M Capital's Profit Soars Last Year... Boosting Growth Gear with Capital Increase

Raised 50.7 Billion KRW Through Capital Increase Targeting Existing Shareholders
Utilizing Auto Finance Leasing, Retail Finance Loans, and Equipment Finance Leasing Funds
Operating Profit of 54.1 Billion KRW Last Year... 83.4% Increase Compared to Previous Year

[Asia Economy Reporter Park Hyungsoo] M Capital is conducting a paid-in capital increase targeting existing shareholders to raise operating funds. The funds raised will be used to expand operations in auto finance leasing, retail finance loans, and equipment finance leasing.

According to the Financial Supervisory Service's electronic disclosure system on the 30th, M Capital will issue 1,324,580 new shares at 38,280 KRW per share, raising 50.7 billion KRW. Of the funds, 11.1 billion KRW will be used for auto finance including new cars, used cars, and bikes; 18 billion KRW will be allocated for factoring funds related to secured loans and rental company-held bonds for business clients. The remaining 21.6 billion KRW will be assigned to equipment finance leasing.

M Capital is expanding corporate loans such as real estate project financing (PF), working capital loans, asset-based lending (ABL), investment finance, and retail finance to secure profitability. In the past, it mainly handled loans from lending companies, but due to intensified competition and strengthened regulations, it has recently increased its handling of real estate PF.

Korea Ratings explained, "There is a growing trend of joint investments in corporate finance and investment finance with Saemaeul Geumgo Central Association, the major investor of M Capital's largest shareholder," adding, "Considering Saemaeul Geumgo Central Association's deal sourcing capability, if the scale of joint investments increases, M Capital's business stability is expected to improve."

M Capital, a specialized credit finance company, provides leasing finance (facility rental), installment finance, and new technology business finance services. As of the end of last year, M Capital's business portfolio consisted of 22.1% leasing finance, 1.7% installment finance, 54.4% loan receivables (including factoring), and 21.8% investment finance (marketable securities). Since the change of the largest shareholder, it has diversified its asset portfolio focusing on corporate finance and investment finance.

On December 19, 2020, the largest shareholder changed from Hyosung to Smart Leaders Holdings, a special purpose company (SPC) established by ST Leaders PE. On February 25 of last year, the company name was changed to M Capital. Saemaeul Geumgo Central Association participated as the largest investor (59.76%) in Smart Leaders Holdings, which holds 97.98% of M Capital's shares.

The new share issuance price of 38,280 KRW represents a 12.2% increase compared to the issuance price of 34,109 KRW at the time of the largest shareholder change in 2020. This reflects improved profitability due to lower funding costs since the change of the largest shareholder. M Capital achieved an operating profit of 54.1 billion KRW on a consolidated basis last year, an 83.4% increase from 29.5 billion KRW the previous year. Net profit recorded 43.4 billion KRW, up 104.7% year-on-year.

Unlike banks and insurance companies, M Capital does not have deposit-taking functions, so funding is conducted through corporate bond issuance and borrowings. As of last year, corporate bonds accounted for 80.1%, general borrowings from banks 16.2%, and securitized borrowings 3.7%. M Capital's unsecured bond credit rating remains at A-.

Taeyoung Accounting Corporation, responsible for evaluating M Capital's corporate value, calculated the per-share value by weighting net income value and net asset value at a 3:2 ratio according to the Inheritance and Gift Tax Act. M Capital's corporate value was evaluated at 453.7 billion KRW, with a per-share valuation of 40,291 KRW.