Mirae Asset Securities(006800) posted record results in the second quarter this year, but an analysis said investors should watch for earnings uncertainty in the second half due to SpaceX share price swings. SK Securities estimated Mirae Asset Securities' related valuation gains and losses would change by about 29 billion won for every $1 move in SpaceX's share price, and cut its target price by 17.6%.
On the 13th, Jang Young-im, an SK Securities analyst, lowered the target price for Mirae Asset Securities to 42,000 won from 51,000 won. The investment opinion stayed "buy." The previous session's closing price was 36,500 won.
Mirae Asset Securities' second-quarter net income attributable to owners of the parent was 1.8959 trillion won, up 370.1% from a year earlier and 90.3% from the previous quarter. It also beat the market consensus by 25.9%. However, a large part of the strong results came from valuation gains on investment assets.
On a consolidated basis, second-quarter fair value valuation gains and losses on investment assets came to 1.6407 trillion won, the highest ever. Of that, SpaceX valuation gains accounted for most at 1.6242 trillion won. Excluding SpaceX valuation gains from second-quarter consolidated pretax profit of 2.5287 trillion won, pretax profit is about 904.4 billion won.
Earnings power in the core business also improved. Brokerage fee income rose 36.2% from the previous quarter, and wealth management fee income increased 14.1%. Investment banking (IB) and other fee income also climbed 37.5% on the back of acquisition finance, mergers and acquisitions (M&A) advisory, and real estate project financing (PF).
The concern is the second half. According to SK Securities, SpaceX shares recently fell to the $130 range, down about 20% from $170 at the end of June. As a result, SK Securities lowered its third-quarter earnings estimates for Mirae Asset Securities.
Jang said, "We estimate that related valuation gains will change by about 29 billion won every time SpaceX's share price moves by $1," adding, "The trajectory of SpaceX's share price will set the tone for third-quarter results."
Indeed, despite net income nearing 2 trillion won in the second quarter, SK Securities raised this year's consolidated net income attributable to owners of the parent forecast only 2.1% to 3.5298 trillion won for this reason. The explanation was that if SpaceX shares fall further, the large valuation gains recognized in the second quarter could, conversely, heighten earnings volatility in the second half.
Jang explained that "in the short term, the significant volatility of SpaceX-related earnings will likely weigh on the share price," and said the target price was lowered to reflect a wider risk premium.
Jang added that classifying the additional 300 billion won invested at the time of SpaceX's listing as financial assets measured at fair value through other comprehensive income (FVOCI) is positive, but since a sizable amount is still classified as financial assets measured at fair value through profit or loss (FVPL), with SpaceX share price movements directly affecting results, additional measures to mitigate volatility are needed.
SK Securities also cited Mirae Asset Securities' three-year shareholder return policy, to be announced with its third-quarter results, as a key variable for the share price.