Mirae Asset Daewoo Posts Solid Q1 Earnings... What Is the Future Outlook?

[Asia Economy Reporter Song Hwajeong] Amid expectations of poor performance by securities firms due to the novel coronavirus infection (COVID-19), Mirae Asset Daewoo posted solid results in the first quarter of this year. Future outlooks are divided between opinions that a conservative view is necessary for the time being and forecasts that annual performance will also be favorable.

According to the Financial Supervisory Service's electronic disclosure system on the 1st, Mirae Asset Daewoo recorded a consolidated operating profit of 138.7 billion KRW, a pre-tax net profit of 150.7 billion KRW, and a net profit of 107.1 billion KRW in the first quarter. Operating profit decreased by 2.4% compared to the same period last year but exceeded market expectations by approximately 77% and 97%, respectively.

Jeong Taejun, a researcher at Yuanta Securities, analyzed, "It is encouraging that an earnings surprise was achieved despite the difficult environment," adding, "This was because brokerage commission income and other gains exceeded estimates."

Compared to the previous year, market trading volume showed a record increase, boosting brokerage-related income, and the proportion of corporate finance (IB) fees recorded over 20% for eight consecutive quarters. Additionally, the overseas division accounted for 29.3% of total pre-tax consolidated revenue. Looking at net operating income by division, brokerage commission income was 143.2 billion KRW, a 70.7% increase from the previous quarter. IB commission income decreased by 15.6% compared to the previous quarter. Total IB-related income (103.6 billion KRW) has maintained over 100 billion KRW for eight consecutive quarters since the second quarter of 2018. Trading gains and losses, including proprietary investment (PI), were 55.2 billion KRW, down 59.6% from the previous quarter.

Although the first quarter showed solid results, future outlooks are somewhat mixed. Jeong Junseop, a researcher at NH Investment & Securities, stated, "It appears that no significant valuation losses occurred in investment purpose assets in the first quarter," adding, "There are still aspects to confirm, such as whether asset size and related income can be maintained after the second quarter, whether IB performance remains robust in the second quarter, and the resolution of uncertainties related to new investments such as U.S. hotel investments."

Baek Doosan, a researcher at Korea Investment & Securities, said, "We maintain a 'neutral' opinion on Mirae Asset Daewoo," explaining, "Although sales and trading (S&T) income is expected to improve significantly in the second quarter, IB fees and income from distributions and dividends are expected to decrease." Baek added, "It is time to monitor the direction of investment purpose assets, which have grown larger after a 679.3 billion KRW equity investment in Naver Financial at the beginning of the year, and sell-down related assets."

On the other hand, there are opinions that the expectations should be raised. Im Heeyeon, a researcher at Shinhan Financial Investment, said, "Despite increased market volatility, the operating profit resilience is quite solid," adding, "Considering the effect of increased distributions and dividends due to the growth of investment purpose assets, the qualitative aspect of profits has clearly improved compared to the past. Market expectations need to be adjusted upward."

There is also a forecast that annual performance will improve. Kim Jiyoung, a researcher at Kyobo Securities, said, "With stronger-than-expected performance in the first quarter this year, favorable annual performance improvement is expected," adding, "Since investments in overseas stocks as well as domestic stocks through brokerage have been steady, benefits from the recent expansion of individual investor participation are anticipated, and in the long term, asset management income improvement due to interest rate declines is also expected positively."

This content was produced with the assistance of AI translation services.