[Click e-Stock] "Samsung Securities' Dividend Appeal Increases... Earnings Improvement Yet to Come"

[Asia Economy Reporter Myunghwan Lee] IBK Investment & Securities announced on the 27th that it maintains a buy rating on Samsung Securities but lowers the target price from 60,000 KRW to 55,000 KRW. The reason is the expected profit decline this year due to reduced brokerage commissions.

Samsung Securities' consolidated net profit for the first quarter of this year was 151.8 billion KRW, down 47.5% compared to the same period last year. It is analyzed that the decrease in brokerage commissions and financial income sales led to a significant profit decline compared to the same period last year. On a separate basis, brokerage commissions and financial product sales revenue decreased by 52.3% and 18.8%, respectively, compared to the same period last year. However, profits increased compared to the previous quarter, which is attributed to improvements in operating and financial gains/losses. IBK Securities evaluates that there is still room for improvement in operating and financial gains/losses compared to the first to third quarters of last year. The consolidated net profit forecast for this year is presented at 706 billion KRW, a 27% decrease from the previous year.

Despite a significant decrease in custody fees, IBK Securities analyzes that the retail customer base is being maintained. Samsung Securities' retail customer assets are steadily increasing with net inflows totaling 309 trillion KRW, and overseas stock deposit assets continue to grow. Although the expanded retail customer base last year significantly contributed to improved performance through financial product sales revenue, recent market downturns have reduced profits.

IBK Securities also evaluated that Samsung Securities has a high dividend yield and a high predictability of dividend yield. Samsung Securities recorded a dividend payout ratio of 35.2% and a dividend yield of 7.7% on a consolidated basis last year. The 2021 dividend payout ratio was lower than the 39% payout ratio of 2019?2020, which appears to have been adjusted due to a significant increase in net profit. Although a profit decline is expected this year, the dividend payout ratio is expected to rise again to around 39%, and in this case, the dividend yield forecast is expected to increase by 8%, making it higher than in 2021.

There is also a forecast that if the retail customer assets or number of customers are maintained and the business environment improves, it could play an important role in performance improvement. Kim Eungap, a researcher at IBK Securities, said, "Given the recent market conditions, meaningful performance improvement in the retail sector is unlikely in the short term," but added, "If conditions such as transaction activation improve, the foundation for profit growth is still maintained."