[Click eStock] "Korea Capital, Strong Performance Raises Dividend Appeal"

[Asia Economy Reporter Jihwan Park] KB Securities announced on the 27th that Korea Capital continues to show strong performance along with increasing dividend attractiveness.

Korea Capital, established in 1989, is a specialized credit finance company whose largest shareholder changed to the Military Mutual Aid Association in 2001. In accordance with the Specialized Credit Finance Business Act, it operates financial businesses such as corporate finance, lease finance, and retail finance. It has also entered the auto finance sector as a new business.

KB Securities analyst Sang-guk Lim said, "The third-quarter operating profit was 17.7 billion KRW, a 54.5% increase compared to the previous year," and "net profit rose 48.8% to 13 billion KRW." It is evaluated that a virtuous cycle of growth continues due to effects such as asset expansion through stable funding, portfolio diversification, and reduced funding costs following credit rating upgrades.

Korea Capital has maintained a clear growth trend since 2017 after successfully improving its business structure from a lease finance-oriented model. Continuous growth is expected in 2022 following the achievement of record-high performance this year. The scale of operating assets has steadily expanded, surpassing the historic high of 3 trillion KRW in operating assets. It is anticipated that the company will expand its highly profitable corporate finance sector amid solid asset growth.

The new auto finance business is also expected to continue growing steadily after its full-scale launch this year. As of the third quarter, it maintains stable financial soundness with a capital adequacy ratio of 13.4% and a delinquency rate of 1.8%.

Favorable funding conditions are also possible due to the credit rating upgrade. Analyst Lim said, "Since the upgrade to credit rating A, Korea Capital’s corporate bond issuance funding rate was at 2.49% as of the third quarter, securing the best funding capability in its class," and added, "It is judged that even with future base rate hikes, Korea Capital will be able to secure funding under more favorable conditions compared to competitors."

Furthermore, an increase in dividends is expected due to rising net profits. The average dividend payout ratio over the past seven years is about 30%, and the dividend yield as of the end of 2020 was 4.2%. However, although short- and long-term liquidity capabilities are sound, the industry’s characteristics pose a risk of profitability deterioration due to external shocks, which is considered a burden.

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