James Lim of Dalton Investments presented his in-depth investment thesis on Meritz Financial Group (Korea: 138040) at Asian Investing Summit 2018.
Meritz Financial is a financial holding company that owns 52% of Meritz Fire & Marine (#5 in size and #1 in ROE in South Korean non-life insurance business) and 43% of Meritz Securities (#6 in size and #1-2 in ROE).
Since the appointment of talented new management a few years ago, Meritz Fire & Marine has improved ROE from 9% to 20% and Meritz Securities from 4% to 14%. Meritz Fire & Marine is seeing high growth in new premiums (#2) due to a competitive sales commission rate, based on low fixed costs and relationship building with general agencies, which have displayed strong growth. Meritz Securities has become a dominant player in the real estate financing business, with strong risk management, and is now going after large-scale deals and foreign deals. The shares recently traded at 1x P/B, 6x P/E, and a dividend yield of 3.4% despite a payout ratio of only 20%.
The main shareholder owns 68% of the equity, and the talented co-CEOs each have a $10 million base of stock options while most of their performance-based bonuses get paid out over ten years and linked to share price performance, inducing long-term thinking and strong alignment of interests with minority shareholders. The group has a merit-based culture (thus the name Meritz) and stands out from the conservative, rigid, and rather bureaucratic Korean financial industry.
The full session is available exclusively to members of MOI Global.
Members, log in below to access the full session.
Not a member?
Thank you for your interest. Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:
About the instructor:
James Lim is a Senior Research Analyst for Dalton’s Asia equity research team, and has 4 years of investment experience. Prior to joining Dalton in 2015, Mr. Lim worked as a senior associate consultant at Bain & Company in Seoul, Korea. Mr. Lim holds an MBA from the University of Chicago, and a BS in Business Administration from Yonsei University.