Shinhan Investment & Securities said on the 26th that iM Financial Holdings has ample room to expand shareholder returns and that the valuation gap with major large banks will gradually narrow.
It maintained a Buy rating and raised the target price to 19,000 won from 17,000 won. The previous trading day's closing price of iM Financial Holdings was 15,760 won.
Eun Kyung-wan, an analyst at Shinhan Investment & Securities, said, "While paying a year-end dividends, the common equity tier 1 ratio will fall below 12% at year-end, but there should be no difficulty in gradually expanding the scale of shareholder returns," and added, "Accordingly, despite minimal changes to our earnings estimates, we raised our target price to reflect a decline in the valuation discount rate."
The analyst also saw a possibility that iM Financial Holdings will pursue an additional year-end dividends to meet the requirements for applying separate taxation on dividend income. The per-share dividend is around 720 won, and the explanation is that the company will achieve a total shareholder return ratio of 38% by combining a 25% cash dividend with a 13% share repurchase and cancellation. Based on the current share price, the settlement of account dividend yield is 4.6%, and there was also speculation that the company may transfer capital surplus to retained earnings to pursue a reduced dividend.
Meanwhile, as small and mid-sized banks such as iM Financial Holdings have shown relative strength recently, there is analysis that the valuation gap with major large banks will narrow. They are relatively free from issues such as penalty surcharges related to ELS and other matters, and their sensitivity of profit and loss and capital ratios to the rise in the exchange rate is not significant. In addition, as the total shareholder return ratio of major large banks is estimated to exceed 50%, the investment appeal of small and mid-sized banks could stand out in terms of the scope of improvement going forward.
The analyst said, "iM Financial Holdings has ample capacity to further improve its total shareholder return ratio," adding, "Given the low valuation of a price-to-book ratio (PBR) of 0.41 times, it is time to focus on the possibility of narrowing the valuation gap with other banks."