03-24-2017: KB Financial Group Inc. (KB): Koreans LIke To Do Things I In a Big Way

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Recommendation

KB Financial Group Inc.

Koreans like to do things in a big way. KB Financial Group is a huge holding company with a dizzying array of products and services. These include insurance of all types including auto, commercial, and asset management insurance. It also offers life insurance. It has a credit card comany. It has a "capital" division to specifically deal with car dealers. It runs a savings bank. It is an investment and securities dealer/broker. It is also incorporates a real estate trust. It is an investment institution mananaging its own funds. It provides credit information, does debt collection activity, and has its own data systems division.

Unfortunately getting one's grasp around the financials of this corporation is difficult at best not only because of its size, but also because of the unfamiliarity with its reporting style which does not conform to U.S. SEC reporting requirements for domestically-based firms. This not only makes sorting out information difficult, but in some cases informaiton is missing entirely such as that related to executive salaries, insider trading, and employee stock options outstanding. We severely downrate foreign-based corporations providing us that sort of evaluation handicap, noting however that many Peoples' Republic Chinese companies (not Korean ones) meet these requirements or make an effot to do so. Included in the extreme wordiness of management discussions, is an immediate overwhelming list of "risk factors" presented by the company. Foreign-based corporations like this one generally have better financial ratios and appear to be a better "bargain" in their stocks, although this one is more like average. But the reason for the better ratios generally is because of the increased risk associated with companies beyond domestic regulations and control. Especially with Kim Jung Il acting like a maniac in ever more bellucose North Korea, South Korea's proxiimity is a very big risk factor. Any hostilities breakout would affect not just the holding corporation assets but also the assets of corporations to which it makes loans, reducing the possibility of repayment drastically. Investors make the tacit aassumption that the U.S. will continue to help to protect Korea from any such disaster.

Missing information on executive salaries, insider trading, and absence of reviews by American analysts penalizes our rating of this company severely. Even so, with extremely strong stock chart pattern and backing of many Korean financial analysts, the company comes out in the end with a strong Decision Matrix rating at the end of this article. Institutions are net acquirers, and those like Dimensional Fund Advisors that select upon the basis of fundamentals are prominent among them. This is more a "buy and hold" rather than a trading stock in our opinion.

Fundamentals include that this $17 billion South Korean bank is markedly undervalued compared to its peers in a $1.8 trillion GDP South Korean economy. It has a trailing P/E of 9.1, price/book of around 0.6 versus an industry median of 1.2, and a price/sales ratio of 2.14 versus industry 3.3. It yields a 2.5% dividend (despite some bad data in other parts of this article showing zero) with a 19% payout ratio and 52.2% five-year growth. The South Korean economy has been plagued by political instability and uncertainty making economic structural reform impossible until now. But with the ouster of corrupt officials, the impeachment of President Park Geun-hye, there does appear to be some investment opportunity there.



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Zenith Index

Under current market conditions, a Zenith Index Score of 1.20 or above is required for a positive rating on this factor. 1.21 -1.30 is considered acceptable, 1.30-1.40 is considered strong and
> 1.40 is considered exceptionally strong. Accounting statements in this section often contain mistakes, especially in earlier years' totals, but data is deemed sufficient for us to give a rating. More accurate financial statements follow in the next section.

KB Financial Group Inc. (KB)                              Exchange: NYSE
84, Namdaemoon-ro
Jung-gu                          Sector: Financial
Seoul 04534                      Industry:Foreign Regional Banks
South Korea

KB Financial Group Inc., a financial holding company, provides various
banking and related financial services to individuals and corporations
in South Korea and internationally. It operates through Banking
Business, Credit Card Business, Investment & Securities Business, and
Life Insurance Business segments. The company offers deposit products,
including demand deposits, time deposits, savings deposits, certificates
of deposit, foreign currency deposits; and loans, such as mortgages and
home equity, other consumer loans, working capital and facilities loans,
as well as credit cards. It also provides debt and equity securities
investment and trading, derivatives trading, asset securitizations, and
call loans; securities brokerage services; foreign exchange, import and
export-related, offshore lending, syndicated loans, and foreign currency
securities investment services; trustee and custodian services; trust
account management services; management of the national housing fund;
and bancassurance, insurance, and consumer finance services. In
addition, the company offers investment banking services consisting of
project finance and financial advisory services; structured finance; and
financing for mergers and acquisitions. Further, it provides investment
advisory services; real estate trust management; financial leasing
services; and life insurance and wealth management products, as well as
Internet and phone banking services. As of December 31, 2015, the
company operated a network of 1,138 branches and sub-branches in Korea.
KB Financial Group Inc. was founded in 2008 and is headquartered in
Seoul, South Korea.

Last Trade:  45.77                           52-Week Range:  46.04 -  26.45
Employees:                                   Avg.Volume:     150,281 Shares

Corporate Governance:
Pllar scores are Audit: N/A; Board: N/A; Shareholder Rights: N/A; Compensation:
N/A.
         (A lower number means less governance risk.)

EPS:  4.82    Dividend Amount: $ 0.00          Yield:  0.00%
             Ex-Dividend Date: Dec 28, 2015    Payout Ratio:  18.82

Key Statistics:

    Trailing P/E:   9.21              Forward P/E (est.):   8.75
                                           Target Price:  48.00

Qrtly Stock Price Growth (yoy):  62.54%               Beta:   1.02
Qrtly S&P Index   Growth (yoy):  24.50%        Short Ratio:   0.51%
    Qrtly Revenue Growth (yoy):  15.79%         Shares Out:  398360000
   Qrtly Earnings Growth (yoy):   0.00%

          Book Value:  68.26                    Debt/Equity:   0.00%
    Price/Book Value:   0.65        Operating Profit Margin:  24.27%
         Price/Sales:   2.98                  Profit Margin:  31.05%
         Market Cap:  17,910,000,000       Return on Equity:   7.28%
    Enterprise Value:  64,280,000,000      Return on Assets:   0.62%

    Operating Cash Flow: -9,500,000,000
         Free Cash Flow:     -5,233,000



Annual Income Statement:                          (All numbers in thousands)
  Period Ending                             12/31/2015  12/31/2014  12/31/2013

  Total Revenue                             11,690,000  13,411,000  14,944,000
  Cost of Revenue                                    0           0           0
  Gross Profit                                       0           0           0

Operating Expenses:
  Research & Development                             0           0           0
  Selling, General & Administrative          5,573,000   5,827,000   6,139,000
  Non-Recurring Expenses                             0           0           0
  Other Operating Expenses                     885,000   1,117,000   1,368,000
  Total Operating Expenses                           0           0           0

Operating Income or Loss                             0           0           0

Income from Continuing Operations:
  Total Other Income/Expenses Net                    0           0           0
  Earnings Before Interest & Taxes           5,405,000   6,479,000   7,248,000
  Interest Expense                                   0           0           0
  Income Before Taxes                        1,846,000   1,730,000   1,720,000
  Income Tax Expense                           373,000     442,000     512,000
  Minority Interest                            189,000     180,000     180,000

Net Income from Continuing Op.s              1,646,000   1,300,000   1,019,000

Non-recurring Events:
  Discontinued Operations                            0           0           0
  Extraordinary Items                                0           0           0
  Effect of Accounting Changes                       0           0           0
  Other Items                                        0           0           0
  Net Income                                 1,473,000   1,287,000   1,208,000
  Preferred Stock & Other Adjustments                0           0           0

Net Income Avail to Common Shares            1,473,000   1,287,000   1,208,000




Annual Cash Flow Statement:                   (All numbers in thousands)
  Period Ending                         12/31/2015    12/31/2014    12/31/2013

  Net Income                             1,646,000     1,300,000     1,019,000

Operating Activities:
  Depreciation                             220,000       238,000       272,000
  Adjustments to Net Income              1,940,000     2,313,000     2,728,000
  Changes in Accounts Recv'bls                   0             0             0
  Changes in Liabilities                   731,000      -719,000    -1,212,000
  Changes in Investories                         0             0             0
  Changes in other Oper'g Acts          -2,600,000      -233,000    -9,120,000

Total Cash Flow f Operations             1,871,000     2,981,000    -6,013,000

Investing Activities:
  Capital Exenditures                     -195,000      -184,000      -145,000
  Investments                           -4,186,000        19,000     2,385,000
  Other Cash Flows fr Investing             54,000    -1,368,000     1,720,000

Total Cash Flows from Investing         -4,328,000    -1,532,000     3,960,000

Financing Activities:
  Dividends Paid                          -261,000      -176,000      -220,000
  Sale of Purchase of Stock                      0             0             0
  Net Borrowings                         2,882,000       408,000       800,000
  Other Cash Flows fr Financing            155,000      -919,000     1,720,000

Total Cash Flows from Financing          2,776,000      -687,000     1,618,000

  Effect of Exchange Rate Chg               56,000        11,000        39,000

Change in Cash & Cash Equiv.               375,000       773,000      -396,000




Annual Balance Sheets:                              (All Numbers in Thousands)
  Period Ending                          12/31/2015    12/31/2014    12/31/2013
Current Assets:
  Cash & Cash Equivalents                13,915,000    14,033,000    14,017,000
  Short Term Investments                          0             0             0
  Net Receivables                            16,000       279,000       329,000
  Inventory                                       0             0             0
  Other Current Assets                            0             0             0
  Total Current Assets                   13,931,000    14,312,000    14,346,000

  Long-Term Investments                 245,934,000   245,122,000   243,134,000
  Property, Plant & Equipt                2,804,000     2,805,000     2,900,000
  Goodwill                                        0             0             0
  Intangible Assets                         398,000       445,000       420,000
  Accumulated Amortization                        0             0             0
  Other Assets                           17,567,000    17,843,000    16,030,000
  Deferred LT Asset Charges                   7,000        14,000        15,000

Total Assets                            280,640,992   280,540,000   276,844,000

Current Liabilities:
  Accounts Payable                           88,000       280,000       261,000
  Current Portion LT Debt                27,803,000    26,567,000    25,621,000
  Other Current Liabilities             191,264,992   192,466,000   190,346,000
  Total Current Liabilities             219,156,000   219,312,992    216,228,000

  Long Term Debt                             88,000       280,000       261,000
  Other Liabilities                      27,803,000    26,567,000    25,621,000
  Deferred LT Liab. Charges             191,264,992   192,466,000   190,346,000
  Minority Interest                         189,000       180,000       180,000
  Negative Goodwill                         189,000       180,000       180,000

Total Liabilities                       242,260,992   241,171,008   239,043,008

Stockholder Equity:
  Misc. Options, Warrants                         0             0             0
  Redeemable Preferred Stock                      0             0             0
  Preferred Stock                                 0             0             0
  Common Stock                            1,647,000     1,758,000     1,830,000
  Retained Earnings                       8,924,000     8,249,000     7,447,000
  Treasury Stock                                  0             0             0
  Capital Surplus                        13,521,000    14,424,000    15,023,000
  Other Stockhohlder Equity                 367,000       420,000       319,000
  Total Stockholder Equity               24,460,000    24,851,000    24,620,000

Net Tangible Assets                      24,062,000    24,406,000    24,200,000




KB Financial Group Inc. (KB)                [Indices near +3.0, near zero,
                                            or < zero bear special attention.]
P/E Ratio Tests:
P/E Ratio < 28?            3.0000          P/E Ratio > 5?             1.0000
P/E Ratio Vs Growth Rate:  0.0000          Forward P/E Ratio < 28?    3.0000
Price/Sales Ratio < 2.3?   0.7718          Inventory/Sales < 5%?      1.0000
Sales < $1 Billion?        0.0855          Operating Margin < 7.5%?   0.3090

Balance Sheet Tests:
Debt/Equity < 0.40?        1.0000          Long-Term Debt Service:    3.0000
LTD Being Reduced?         0.0000          Short-Term Debt Service:   3.0000
Current Ratio > 2?         0.0318          Working Capital >= 1.5?    3.0000
Leverage Ratio < 20%?      1.4043          Debt/Assets < 1?           3.0000
Quick Ratio > 1?           3.0000          Inventory Turnover > 1?    1.0000
Share Equity Increase:     1.9936          Market Cap.< 1.5 Billion?  0.0838
                                           Intangibles < 3% Assets?   3.0000
Income Tests:
Profit Margin < 7.5%?      3.0000          EPS Annual Growth > 10%?   0.0874
Dividend Yield > 2.0%?     0.0000          EPS 3-yr Growth > 15?      0.1230
Enterprise Value/Revenue   1.5311          EPS Growth Consistent?     2.0000
Enterprise Value/EBITDA:   3.0000          Collection < 45 days?      3.0000
EPS Qrtly Growth > 10%?    0.0000          Gross Pft/Cur. LTD > 1?    0.0000
                                           Borrowing Int. Rate < 6%?  3.0000
Stock Performance Tests:
Volatility > 25%?          1.7020          % Held by Insiders < 5%?   1.0000
Beta > 1.25?               0.8160          % Held by Institut. < 50?  1.0000
50 Da MA > 200 Da MA?      0.2917          % Held by Institut. > 30?  0.0000
52-Wk Change vs. S&P 500:  3.0000          Short Ratio > 5?           0.1020
Price/Book Value < 3?      3.0000          Short % of Float > 20?     0.0000
Return on Assets > 17%?    0.0365          Average Volume > 100,000?  1.5028

Cash Flow Tests:
Oper. C.F. > Lever'd C.F:  3.0000          Positive Free Cash Flow?  -1.0000
Positive Oper. Cash Flow? -1.0000          Price to C.F.Ratio < 14?:  3.0000
                                           Cash Flow / Assets > 10%?  0.3198

KB     KB Financial Group Inc.             Overall Zenith Index:      1.3306


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Financial Statements

Income Statement:

Balance Sheet:

Cash Flow Statement:




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Average to Current P/E Ratios
              (KB)     NYSE: KB FINANCIAL GROUP

                               2012    2013    2014    2015    2016

          Annual Earnings:    44.67   32.49   36.11   43.76   55.59
Average Price During Year:    34.03   34.25   35.99   32.80   30.33

                P/E Ratio:     0.76    1.05    1.00    0.75    0.55

 Average 5-Year P/E Ratio  =   0.82
             Current Price =  44.45

Previous 5 Quarter Earnings:   8.92   14.09   15.23   14.95   11.34

           Current Annualized (Last Four Quarters) Earnings =  41.52
                                                           ________
                                 Average PE / Current PE =     0.77
                                                           --------

                                      ...a number above 1.00 is good
                                                1.00 or below is bad


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Financial Ratios

. . . . . . . . . . . . 1 = Highest , 10 = Lowest



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Second Opinion

900
901



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Intrinsic Value (DCF)

Intrinsic Value by Discounted Cash Flow Method:

Intrinsic Value



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Book Value

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Insider Activity

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Institutional Activity

Institutional Orders to Buy or Sell:

institutions 1
Ownership:

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Sentiment

sentiment

Zenith uses the "sentiment" score above or below 50 to award a positive or negative point in the Decision Matrix.

sentiment sentiment sentiment



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Short Interest Ratio

As the short interest rises as a percentage of average daily share volume (Days to Cover), this is considered a measure of negative sentiment. Similarly, a decrease in that percentage is considered positive sentiment.

short interest short interest


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Management's Discussion of Results of Operations Excerpts

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Moving Average Chart



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Channeling Potential

 
The summary below includes a value for `Degree,' which refers on a
scale of 1 to 10 the range of a channel in the period under consi-
deration compared to the total range of price movement. It also looks
for the last closing price to be within the channel, otherwise zeroed.
The `Index' is the `Degree' weighted for volatility.  Generally, the
the higher the index, the more suitable is the stock for trading as
a `rolling stock' between channel high and low points.

Results for KB FINANCIAL GROUP INC.:
Symbol? KB
Total Months Available:  39
       Months in Cycle?   4

Months Covered by Periods:  12

Period 1           Period 2          Period 3
   H1      L1        H2      L2        H3      L3
  31.63   26.45     38.56   29.66     46.04   34.36

RANGE   =  46.04  TO   26.45            Close =  44.45
CHANNEL =  34.36  TO   31.63           Degree =   1
Volatility =   6.14%                    Index =   0
Channel Chart



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MACD Histogram Divergence

The theory is that connecting the two most recent peaks or valleys of the MACD histogram will signal the direction of the next major move.



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Intraday Chart

2 Days:



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Val Idea

6 out of 8 favorable, (positive opinion.)

Val Idea


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Time Series Forecast

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Neural Network Prediction

"Neurostock" can only track long trades. Therefore its performance, as tracked by itself on stocks which are consistently falling, may not appear as good as it could if each "sell" signal were a "short sale."

Neural Chart
Heading Neural Trades Neural Prediction



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Ultimate Trading Systems

2 out of 3 of the ultimate systems favor an upmove.


System Below:
Short term outlook: Positive: Bright Green, Negative: Bright Red
Long term outlook: Postive: Dark Green, Negative: Dark Red.




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Recommendation

Decision Weighting Factors
FactorsWeighted Points
News + 1
Comparison - 1
Industry + 1
Bond Issue + 1
Zenith Index + 1
Non-GAAP vs. GAAP Earnings - 1
Cash Flow - 1
Average to Current P/E - 1
Ratios + 1
Second Opinion + 1
Intrinsic Value DCF 0
Book Value - 1
Projected Earnings + 1
Research Reports + 1
Analysts + 1
Executive Perquisites - 1
Insider Activity - 1
Institutional Activity + 1
Management Reporting - 1
Short Interest + 1
Sentiment + 1
Moving Average + 1
Right Time Study + 1
MACD Histogram Divergence + 1
Val Idea + 1
Stock Consultant + 1
Point & Figure + 1
Wall Street Analyzer - 1
Marketspace Chart + 1
Time Series Chart + 1
Neural Network - 1
Stock Options - 1
Ultimate Trading Systems + 1
Total + 10
Place 675 shares of KB Financial Group, Inc. (KB) on the Active List.