Korea Investment Securities announced a 900 billion won shareholder allocation capital increase, confirming the securities industry's willingness to enter the comprehensive investment account (IMA) business once again, and it was assessed that the expanded issuance limit will also lead to increased related profits. However, Korea Investment Holdings noted that the capital increase has become necessary.
Jang Young-im, a researcher from Hyundai Motor Securities, stated in a report on the 27th, "Korea Investment Securities has increased its capital by a total of 1.9 trillion won from the end of last year until this capital increase," and projected, "Considering the net profit and dividends in the second half of the year, the separate equity is expected to reach 11.9 trillion won by the end of this year."
Earlier, Korea Investment Securities announced a 900 billion won shareholder allocation capital increase on the previous day (26th). It plans to issue 18,000 common stocks, with a par value of 5,000 won per share and an issue price of 50 million won per new share. Korea Investment Holdings, which holds 100% of Korea Investment Securities' equity, is expected to fully finance the issuance, and the raised funds are planned to be used as operating capital.
Jang noted that "this capital increase confirms the willingness to enter the IMA business once again," and analyzed, "Through the expansion of equity, the issuance limit will also be expanded, leading to expected increases in profits."
However, he stated that considering the dual leverage ratio, Korea Investment Holdings needs capital expansion.
Jang stated, "Earlier on the 11th, Korea Investment Holdings announced that it will issue 250 billion won in the first-ever additional tier 1 capital securities," explaining that "this is to ensure that the dual leverage ratio (the total amount of subsidiary investments divided by total equity) remains below the regulatory ratio of 130% due to the funding for Korea Investment Securities' capital increase."
At the end of the first quarter, the dual leverage ratio of Korea Investment Holdings was 122.4%. Given the capital increase of 900 billion won, the total amount of investments in subsidiaries is expected to increase, thus it is analyzed that the total equity in the denominator must be sufficiently increased through the issuance of additional tier 1 capital securities to maintain the regulation on the dual leverage ratio.
Jang stated, "The announced amount of 250 billion won does not provide adequate buffer for the dual leverage ratio," asserting that "to estimate the dual leverage ratio at about 126-128%, it would be necessary to issue additional tier 1 capital securities in a minimum of 400 billion won and a maximum of 500 billion won, as resolved by the board of directors."
Meanwhile, Hyundai Motor Securities maintained the target stock price at 186,000 won, stating that there is no dilution in the per-share value of Korea Investment Holdings.