[Click eStock] Kiwoom Securities, Limited Stock Price Concerns Due to Capital Increase

[Asia Economy Reporter Lee Seon-ae] Samsung Securities stated on the 22nd that concerns about the stock price due to the paid-in capital increase of Kiwoom Securities would be limited, maintaining a buy rating and a target price of 190,000 KRW.

Kiwoom Securities decided on the 21st to issue redeemable convertible preferred shares (RCPS) worth a total of 440 billion KRW. Accordingly, the number of newly issued preferred shares is 2,825,466 shares, with conversion prices set at 150,417 KRW (2,660,000 shares) and 240,667 KRW (170,000 shares), representing a 25% and 100% premium over the current stock price, respectively. Considering the 9-year conversion claim period (with a 1-year lock-up) for the 25% premium shares, it is judged that there is a high possibility of conversion to common shares (the 100% premium shares can be converted starting from 2026).

Jang Hyo-seon, a researcher at Samsung Securities, said, "Kiwoom Securities had already mentioned the possibility of fundraising through the RCPS method during the Q1 earnings conference call, so the impact of this announcement on the stock price is expected to be limited."

Considering full dilution of the 25% premium shares, the number of common shares at the end of 2022 will increase by 2.66 million shares. However, the 2022 BPS is 171,113 KRW, a decrease of 0.3% compared to before, so the dilution effect is expected to be limited. The fundraising cost (preferred share dividend rate of 3.3%) is also about 13.2 billion KRW annually, which is not expected to be a significant burden given Kiwoom Securities’ earning power approaching the mid-700 billion KRW range.

Meanwhile, due to this paid-in capital increase, Kiwoom Securities’ separate capital for securities will increase from 2.7 trillion KRW at the end of Q1 to 3.2 trillion KRW, meeting the requirements to qualify as a comprehensive financial investment business operator. Accordingly, credit extension and PBS operations have become possible. Researcher Jang said, "Going forward, the direction of corporate value will depend on demonstrating efficient capital utilization capabilities."

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