April 20, 2024

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[THE INVESTOR] Hunting for a discounted stock? JB Financial Group, a fast-growing Korean banking group, is one such stock that’s still being traded at aggressively low valuation multiples.

Over the past two years, the group’s earnings growth rate stood at a combined 61.4 percent. Last year alone, net income surged 29.7 percent to 185.1 billion won (US$171 million). Despite logging record earnings, JB Financial’s stock price rose only 10.4 percent during this period, with the price-earnings ratio standing at 4.7 times -- the lowest among its industry rivals. 

JB Financial's Seoul headquarters

Local analysts say the current stock price of around 6,500 won is too low considering the steady double-digit growth, coupled with the group’s stable ownership structure and aggressive overseas foray. 

“JB Financial is the most undervalued banking stock in the country,” said Kim In, an analyst at Eugene Investment and Securities. “But starting this year, the earnings over the past two years will be reflected.” Based on such forecasts, Kim put JB Financial’s target price at 8,500 won, almost 30 percent higher than now.

JB Financial is projecting another double-digit earnings growth this year of 12.5 percent, which far exceeds the 7.6 percent median of the eight listed Korean banks. Net income is estimated at 208.3 billion won. 

The growth momentum is expected to prevail among the group’s key units, according to analysts. Jeonbuk Bank and Kwangju Bank are forecast to report 30.8 percent and 5.2 percent growth in earnings, respectively, while Phnom Penh Commercial Bank -- the Cambodian bank Jeonbuk Bank acquired in 2016 -- is expected to post 15.9 percent growth.

“We have optimized our loan review procedures and implemented improved cost controls this year,” Lee Jae-yong, executive director and CFO of JB Financial, during the earnings report on Feb. 9. “We plan to continue efforts to further improve our profitability and pursue more aggressive asset growth starting in 2019.” 

Reflecting the upbeat outlook, foreign investors have already been snapping up the stock. Foreign ownership in JB Financial rose to 29.4 percent in 2015, 37.8 percent in 2016 and 41.9 percent in 2017.

By Lee Ji-yoon (jylee@heraldcorp.com)