It’ll benefit big time from turning around fundamentals.
According to Macquarie Equities Research, it likes Woori Finance Holdings (WFH) as it believes the stock is a leverage play to up-cycle of the sector.
WFH trades at 6.6x 2013E P/E (vs. peak of 26x and trough of 3.5x) and 0.5x P/B (vs. peak of 1.6x and trough of 0.3x). We believe that WFH would be the biggest beneficiary from turning around fundamentals.
First, WFH has the biggest exposure to property related NPL, which is likely to recover from a potential turnaround in the property market.
Second, given continuous restructurings led by the government, WFH has reported higher credit costs than its peers and does not require further regulatory provisioning, which would provide upside risks to the group's earnings in 2013.
Third, WFH has the smallest exposure to the credit card business, where we see a meaningful decrease in merchant fees from 2013.
Hence, WFH would be much less affected by the change. Our price target is Won16,000 based on a PBR methodology, which represent 8.5x 2013E P/E and 0.7x P/B.
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