Sangsangin Investment & Securities said on the 22nd that Mirae Asset Securities(006800) is expected to post record quarterly results in the second quarter but lowered its target price. It said the share of SpaceX's valuation gains in second-quarter net profit attributable to controlling interests would dominate results, but judged that the fact a single investment asset's price swings heavily influence quarterly profit and loss is a reason for a discount.
Sangsangin Investment & Securities maintained a "neutral (Hold)" investment rating on Mirae Asset Securities and cut its target price to 43,000 won from 88,000 won. Mirae Asset Securities' previous closing price was 37,250 won.
Sangsangin Investment & Securities projected Mirae Asset Securities' second-quarter consolidation net profit attributable to controlling interests at 2.582 trillion won, up 540.3% from a year earlier.
Kim Hyun-soo, an analyst at Sangsangin Investment & Securities, said, "We expect record results," adding, "In particular, the equity value of SpaceX held by Mirae Asset Securities is estimated at about 5.4 trillion won."
In the first quarter, about 60 billion won in valuation gains, based on SpaceX's $80 billion corporate value, was reflected in Mirae Asset Securities' results. In the second quarter, after SpaceX listed at a value of $175 billion and rose to about $225 billion as of the end of June, the brokerage estimated the value of Mirae Asset Securities' equity holdings at about 5.4 trillion won based on that.
Kim added, "With about 3 trillion won in additional valuation gains versus the existing book value reflected in consolidation profit and loss, second-quarter net profit is expected to far exceed the core business results."
Even excluding SpaceX's large valuation gains, operating revenue on a separate basis was expected to continue a solid increase.
Second-quarter separate brokerage revenue was projected at 536 billion won, and wealth management (WM) revenue at 108 billion won.
Kim said, "An expansion in domestic stock and exchange-traded fund (ETF) transaction value is driving brokerage, while growth in financial products and pension assets is supporting WM revenue, and net interest is also expected to improve with an expansion in margin lending."
However, there was a note of caution about third-quarter volatility. Since the late-June peak, SpaceX's share price had fallen to below a $158 billion corporate value as of the 21st. As a result, a significant portion of the valuation gains recognized in the second quarter is likely to be reversed into valuation losses in the third quarter.
Kim explained, "There is a high possibility that third-quarter consolidation net profit attributable to controlling interests will swing to a loss, and the fact that the price fluctuations of a single investment asset heavily influence quarterly profit and loss and ROE remains a discount factor."
Kim added, "That said, the valuation burden has eased considerably, and the earnings power of the core business is also improving," and analyzed, "If volatility in profit and loss related to SpaceX stabilizes going forward and we can confirm normalized capital and earnings levels, there is ample room to raise the investment rating to Buy."