Since the implementation of the "corporate value enhancement plan disclosure (value-up disclosure)," securities companies' price-to-book ratios (PBR) have improved significantly. Securities firms, long considered representative low-PBR stocks due to insufficient shareholder returns, low capital efficiency, and financial regulations, appear to be having their corporate value reassessed as they move to actively return value to shareholders.
PBR is a representative metric for evaluating corporate value, and when PBR is below 1, the stock is considered undervalued.
According to the Korea Exchange (KRX) on the 15th, nine securities firms that participated in the value-up disclosure, including Kiwoom Securities, Meritz Financial Group, DB Securities, and Yuanta Securities Korea, saw their PBR surge as share prices rose after the value-up disclosure. The average PBR of securities firms that issued value-up disclosures in the third quarter of this year was 0.88, higher than the 0.58 average PBR of securities firms that did not participate.
Meritz Financial Group, which issued the most value-up disclosures, has a PBR around 2 this month. Meritz Financial Group's PBR, which was 1.77 in the third quarter of last year, rose to 1.88 in the third quarter of this year, and is expected to be 2.1 this month.
Kiwoom Securities' PBR, which was 0.64 in the third quarter of last year, rose to 1.1 in the third quarter of this year and is currently pointing to 1.15. In a periodic disclosure released in March this year, Kiwoom Securities disclosed progress on its value-up goals, including ▲ achieving ROE of 17.6%, ▲ paying a dividend of about 7,500 won, and ▲ buying back and retiring 350,000 shares of treasury stock.
Mirae Asset Securities' PBR climbed more than twofold from 0.44 in the third quarter of last year to 0.98 at the end of the third quarter this year. As of June, Mirae Asset Securities achieved ROE of 8.5%, a shareholder return ratio of 40%, and the retirement of 27.5 million treasury shares.
The PBRs of the six other securities firms that made value-up disclosures also show an improving trend. Korea Investment Holdings (0.43→0.73), NH Investment & Securities (0.61→0.8), and Daishin Securities Co. (0.35→0.52), among other securities firms, are showing the same trend.
Ko Yeon-su, a Hana Securities analyst, said, "Securities firms' PBRs are rising significantly," and noted, "Because the securities industry responds sensitively to stock market conditions, discount factors had been large, but as shareholder return policies strengthen, those factors are being resolved and results are likely to continue improving."
The value-up disclosure, implemented in May last year, is a program in which listed companies themselves establish plans to enhance corporate value to induce proper corporate evaluation and investment. Listed companies participating in it disclose their business status, financial indicators such as PBR and return on equity (ROE), and corporate value enhancement targets.
Securities firms have long been cited as representative "low-PBR" stocks, as cases of exceeding 1 times PBR were rare. But since implementing the value-up disclosure, securities firms have actively raised shareholder return ratios.
In the securities industry, analysis is emerging that as shareholder return policies such as increased dividends and the buyback and retirement of treasury shares are actively implemented, actual corporate re-ratings have taken place and share prices have risen. Lee Jun-seo, a Dongguk University business professor who previously served as president of the Korean Securities Association, said, "The biggest beneficiary sector of the value-up program is financials," adding, "In particular, for securities firms, as shareholder return ratios have been lifted, the discount has narrowed."
Jo Jin-woo, Head of Team at the Corporate Value-up Support Department in the Management Support Division of the Korea Exchange (KRX), assessed that shareholders' evaluations of corporations changed through disclosure as a means of communication. Jo said, "A broad-based re-rating has occurred thanks to the value-up program," and added, "In particular, in the case of financial holding companies that moved preemptively with value-up disclosures, PBRs have risen significantly."