Woori Financial: This Rally Has Legs

seekingalpha10-25

Woori's recent re-rating is well-justified.Still, the stock remains too deeply discounted.Investors get paid a well-covered yield to sit and wait.tupungato Woori Financial Group (NYSE:WF), the Korea-...

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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nWoori Financial: This Rally Has Legs\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-25 00:21 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4729069-woori-financial-stock-rally-has-legs><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Woori's recent re-rating is well-justified.Still, the stock remains too deeply discounted.Investors get paid a well-covered yield to sit and wait.tupungato Woori Financial Group (NYSE:WF), the Korea-...</p>\n\n<a href=\"https://seekingalpha.com/article/4729069-woori-financial-stock-rally-has-legs\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4207","symbol_name":"综合性银行","start_time":0,"source_url":"https://seekingalpha.com/article/4729069-woori-financial-stock-rally-has-legs","article_id":"2478135126","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1519041930/image_1519041930.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2478135126","pubTimestamp":1729786889,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Woori's recent re-rating is well-justified.Still, the stock remains too deeply discounted.Investors get paid a well-covered yield to sit and wait.tupungato Woori Financial Group (NYSE:WF), the Korea-b","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4207":"综合性银行","WF":"韩国友利金融"},"translate_title":"友利金融：这次反弹有腿","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"WF":0.9},"content_text":"Woori's recent re-rating is well-justified.Still, the stock remains too deeply discounted.Investors get paid a well-covered yield to sit and wait.tupungato Woori Financial Group (NYSE:WF), the Korea-based financial holding company housing the core Woori Bank, card (Woori Card), advisory (Woori Investment Bank), and private equity (Woori Private Equity) subsidiaries, has come a long way since its takeover and subsequent recapitalization by the Korean government. In fact, since being relisted five years ago, Woori is now fully privatized and free of state ownership. Woori Yet, to a large extent, Woori's past failures continue to weigh on its valuation, which, despite re-rating quite significantly since I last outlined the opportunity (see Woori Financial: This High Yielder Is No Longer A Value Trap), remains at an industry low >60% discount to book. This discount persists despite the many positive steps management has taken in recent quarters, from being the first to outline its 'value-up' plans (i.e., governance reforms aimed at narrowing the 'Korea discount') to closing highly accretive life insurance acquisitions. While there are drawbacks, the stock's wide discount and ~7% yield more than account for them; hence, a favorable risk/reward here. Data by YCharts Life Insurance Acquisitions Closed on Favorable Terms Woori recently disclosed Board approval for the acquisitions of two life insurers, Tongyang Life (75.34%), the sixth-largest by market share in Korea, and ABL Life Insurance (100.0%), the ninth-largest, for a KRW1.55tn consideration. These acquisitions have been a long time coming, as deal negotiations initially commenced in May, followed by both parties signing a Memorandum of Understanding in June. The only surprise was the price - substantially below end-2023 net assets for both Tongyang and ABL. Woori Woori Whether the favorable terms were down to China's Dajia Insurance Group looking for a quick exit or from interest rate shifts, the bargain price paid means deal outcomes are almost certain to be accretive. More broadly, it also marks a great start to new CEO/Chairman Yim Jong-yong's efforts to grow Woori's assets and diversify beyond core banking. Woori No Post-Acquisition Downside; Look to Upside Instead As for downside risks from the acquisitions, management's reassurance on the Q2 conference call that \"we are not considering a paid-in capital increase at all\" likely still applies, considering the big discounts they've been able to negotiate for both assets. Affirming management's guidance are positive reactions from the big three credit agencies (Fitch, Moody's, and S&P), all of which noted the group's ample liquidity and balance sheet capacity. In sum, all signs point to a status quo capital outcome post-acquisition, implying Woori's tier-1 ratio target of 12.2% by year-end remains intact. Woori With the downside risks well-contained, I would instead look to the upside, as both insurance assets look poised to add an immediate boost to the bottom line upon integration. Also worth monitoring are mid-term P&L contribution targets for both assets, as synergies with the rest of the Woori ecosystem could drive sizeable upward revisions to Street numbers. Silver Linings as Korea's Rate Cut Cycle Kicks Off While the M&A helps, the big interest rate headwind cannot be ignored. For context, this month's 25bps rate cut (the first in over a year) marked the start of what looks to be a prolonged easing cycle. Reuters Rate cuts are bad for banks like Woori as their assets typically reprice ahead of liabilities, resulting in net interest margin compression. The silver lining, however, is that hawkish commentary from the governor points to a more gradual pace of follow-up cuts, which should at least mitigate the worst of the margin fallout. Still, it's probably prudent to pencil in some margin erosion through Q4. Combined with a further retail-led deceleration in loan growth (in line with the latest monthly system numbers) due to regulatory lending curbs, expect some near-term pressure on Woori's bank earnings. The key offset, though, is on the balance sheet. Specifically, asset quality, a key overhang for Korean banks over the last year, and one that should improve as interest rates decline. While Woori isn't as exposed to problem areas like project financing, lower rates should nonetheless boost asset quality and help to clear some of the overhang priced into its shares. Woori In the meantime, Woori's steep discount means investors have many ways to win. Note, for instance, that the market gives little to no credit to management's tapping into cost levers or accretively growing its non-bank operations. Nor the fact that management was first to market with its 'value-up' plan, which outlined a path toward getting its return on equity to 10% (and beyond), while also committing to higher shareholder returns. Any semblance of success on either of these fronts could re-rate the stock quite substantially over time. Woori Final Note on Risks & Summing Up Of course, the Woori investment case is not without risks. At the macro level, interest rates and regulatory developments are key. At the company level, integrating the newly acquired insurance businesses presents an execution risk worth monitoring. Also, how Woori's new management navigates the fallout from a recent fraudulent loan case involving its ex-CEO/Chairman will be crucial to lifting any governance overhang priced into the stock.  That said, a lot can be forgiven with Woori trading over 60% below book - despite sustaining a high-single-digit % ROE, growing its earnings, and consistently returning capital to shareholders through the cycles. Couple this with the essentially 'free' upside from its 'value-up' plans and life insurance acquisitions, and you get a strong case to hang onto this ~7% yielder, in my view.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2478135126"}