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BANKS ANALYSIS April 3, 2006
ABL @ 84 Accumulate for the target price of Rs. 115 MCB @ 230 Buy on dips for the target price of Rs. 300 ACBL @ 100 Buy on dips for the target price of Rs. 145
Our banks detailed analysis for CY05 has made us come up with four banks as our favourite picks for the sector. The sector has outperformed for the FY05 where the deposits have grown almost by 135% and the advances have increased by 40% for the FY05 as compared to FY04. Despite of the maintained ADR, the Net interest income has grown by 79% whereas the average Return on Equity was 26% for the FY05 and the average P/BV stays at 2.98. (The above analysis excludes the smaller banks)
Relationship between ROE & P/BV
BOP @ 92 Buy for the target price of Rs. 128
Current Scenario ……
Research Department
Standard Capital
Securities (Pvt) Ltd.
17%
ROE
26%
40%
705-706, 7th Floor,Business Plaza, I .I Cundrigar Rd, Khi. Tel : 111-111-721 (Ext-107,108) Fax : 2473302
P/BV
1.95
BOP
ACBL 2.98 & ABL
5
MCB
Website: www.scsecurities.net Email: [email protected]
This report has been prepared by SC securities and is provided for information purposes only. Under no circumstances is to be used or considered as an offer to sell or solicitation of any offer to buy. While all reasonable care has been taken to ensure that information provided is not untrue however data has been collected from the reliable sources, we make no representation as to its accuracy
SCS Bank Analysis CY05 ABL @ 84- Accumulate for the target price of Rs. 115
Allied Bank Limited has posted its ever-highest profit after tax in its history. The PAT has increased from Rs 192 million in FY04 to Rs 3,033 million in FY05 showing phenomenal growth in its PAT by 1,482 percent. The profit before tax for FY05 is Rs 4,777 million that is an improvement of 892 percent over the profit before tax for the FY04. The diluted EPS for the FY05 is 6.89, though in its last quarter of Based on our projected earnings of Rs. 10.20 FY05 it posted an EPS of Rs 2.28 for FY06, assuming 40% growth in net that is equal to the EPS of 3Q05. interest income against 150% growth for ABL is currently trading at a PE multiple of 12 that FY04-FY05, the bank is trading at the PE is almost in line with the banking of 8.24. Applying the multiple of 11.5, which sector PE multiple based on FY05 is at premium to the sector’s average multiple of earnings. The BV of ABL is PBV multiple 2.87 whereas the multiple stands at PBV, ABL is slightly below the
11against 11.6 in the current scenario, as the bank has out performed the sector in terms of growth, the fair value may be computed to Rs. 117, whereas applying the average P/BV of 2.98, prospective ROE of 26% and the earnings for FY06, the fair value comes around Rs. 115.
Rs 29.59, with that comes to about sector PBV 2.98. In terms of currently trading sector multiple.
ABL showed an increase in its advances by 87 percent against the sector’s average growth of 40% whereas the deposits showed a growth of 128 percent. Its Advance/Deposit ratio comes to 69 percent and he Net Interest Income of the bank has increased by 148 percent that constitutes to about 79 percent of the Gross Income of ABL The short term - long term ratio for the FY05 is 68:32 which is in line with the sector’s average ratio of 68:32.
Recommendation: Based on our analysis above, we may recommend to accumulate the share for the target price of Rs. 115.
SCS Bank Analysis CY05 ACBL @ 100- Accumulate for the target price of Rs. 145
The bank has posted the profit after tax of Rs 2,021 million in FY05 showing 5% growth from FY04 mainly due to the heavy provisioning. The diluted EPS for the FY05 is 10.08. ACBL is currently trading at a PE multiple of 9.9 which is at discount to the banking sector PE multiple of 11.6 based on FY05 earnings consequential to he lower growth as compared to the other banks in the sector. Coming to P/BV ROE for he bank is average ROE of the currently trading at 2.32, which is also at sector’s multiple of
Our projected earnings for FY06 is Rs.13.2 assuming 28% growth in net interest income the bank is trading at the PE of 10.6, slight below the sector’s average multiple of 11, the fair value may be computed to Rs. 140 whereas, applying the average P/BV of 2.98, prospective ROE of 26% and the earnings for FY06, the fair value comes around Rs. 151.
multiple, as the slight below the sector, the bank is the multiple of discount to the 2.98.
The ADR have been reduced to 0.72 for F05 from 0.84 for the F04 which is in line with the sector’s average, despite of this fact the net interest income of the bank has been increased by 27.7%, constituting 71.5% of the Gross income. The advances have grown b 23.1 percent whereas the deposits showed a growth of 142.6 percent.
Recommendation: Based on our analysis above, we may recommend to buy the share on dips for the target price of Rs. 145.
SCS Bank Analysis CY05 BOP @ 92- Buy on dips for the target price of Rs. 128
The bottom line has grown by 72% which translates into diluted EPS of Rs. 8.2 as compared to Rs. 4.77 for FY04. The last quarter have shown the outstanding The basis of our selection is the Net interest performance where the EPS growth income growth with which we have come up was 18%. The bank is trading at the PE multiple of 11.2 with the earnings of Rs. 11.48 for FY06 based on the based on which the bank is trading at the current diluted EPS for the year whereas the sector PE of 8. Applying the sector’s average multiple stands at 11.6. multiple of 11 adopting conservative Coming to P/BV suggest that the 2.5 – 3.0 is a good Days”. Our selected trading at the which is at discount the sector’s multiple
approach, where the sector’s PE band has been shifted upward inline with the resulted and expected growth, the fair value may be computed to Rs. 126 , whereas applying the discounted average P/BV of 1.9, prospective ROE of 18% and the earnings for FY06, the fair value comes around Rs. 128. (We have taken the discounted P/BV as the ROE for the bank is at the discount to the sector’s average ROE.)
multiple, the history multiple between measure for “Good bank is currently multiple of 1.93, of approx 60% to of 2.98.
The ADR have been maintained to 0.72, which is in line with the sector’s average despite of this fact the net interest income of the bank has been increased by 75%, constituting 70% of the Gross income. The short term - long term ratio for the FY05 is 72:28 as compared to 65:35 for the FY04 whereas the sector’s average ratio is 68:32, this reduces the chance of liquidity crunch. The advances have increased by 61% whereas the deposits have grown by 162%, both are above the sector’s average.
Recommendation: Based on our analysis above, we may recommend to buy the share on dips for the target price of Rs. 128.
SCS Bank Analysis CY05 MCB @ 230 – Buy for the target price of Rs. 300
The bottom line has grown by 268% which translates into diluted compared to Rs. bank is trading at the based on the diluted Based on our projected earnings of Rs. 26.7 year whereas the for FY06, assuming 45% growth in net interest income against 105% growth for stands at 11.6.
EPS of Rs. 17.8 as 4.83 For FY04. The PE multiple of 12.9 EPS for the current sector’s multiple
Coming to P/BV ROE for the bank is ROE of he sector, currently trading at which is also at the sector’s multiple of
multiple, as the above the average the bank is the multiple of 5, premium to the 2.98.
The ADR have 0.79 for FY05 from but is almost in line average, despite of interest income of increased by 105%, of the Gross
FY04-FY05, the bank is trading at the PE of 8.6. Applying the PE multiple of 11.3, which is at premium to he sector’s average multiple of 11 being conservative, the fair value may be computed to Rs. 301 whereas, applying the P/BV of 4.5 which is again at the premium to the sector’s average multiple of 2.98 (as the bank is above the average in terms of growth and ROE as compared to other banks) prospective ROE of 40% and the earnings for FY06, the fair value comes around Rs. 300.
been increased to 0.62 for the FY04 with the sector’s this fact the net the bank has been constituting 71.9% income.
The advances have grown by 31 percent whereas the deposits showed a growth of 103.7 percent. The short term - long term ratio for the FY05 is 71:29 whereas the sector’s average ratio is 68:32, this reduces the chance of liquidity crunch.
Recommendation: Based on our analysis above, we may recommend to buy the share on dips for the target price of Rs. 300.
ABL @ 84 Accumulate for the target price of Rs. 115 MCB @ 230 Buy on dips for the target price of Rs. 300 ACBL @ 100 Buy on dips for the target price of Rs. 145
Our banks detailed analysis for CY05 has made us come up with four banks as our favourite picks for the sector. The sector has outperformed for the FY05 where the deposits have grown almost by 135% and the advances have increased by 40% for the FY05 as compared to FY04. Despite of the maintained ADR, the Net interest income has grown by 79% whereas the average Return on Equity was 26% for the FY05 and the average P/BV stays at 2.98. (The above analysis excludes the smaller banks)
Relationship between ROE & P/BV
BOP @ 92 Buy for the target price of Rs. 128
Current Scenario ……
Research Department
Standard Capital
Securities (Pvt) Ltd.
17%
ROE
26%
40%
705-706, 7th Floor,Business Plaza, I .I Cundrigar Rd, Khi. Tel : 111-111-721 (Ext-107,108) Fax : 2473302
P/BV
1.95
BOP
ACBL 2.98 & ABL
5
MCB
Website: www.scsecurities.net Email: [email protected]
This report has been prepared by SC securities and is provided for information purposes only. Under no circumstances is to be used or considered as an offer to sell or solicitation of any offer to buy. While all reasonable care has been taken to ensure that information provided is not untrue however data has been collected from the reliable sources, we make no representation as to its accuracy
SCS Bank Analysis CY05 ABL @ 84- Accumulate for the target price of Rs. 115
Allied Bank Limited has posted its ever-highest profit after tax in its history. The PAT has increased from Rs 192 million in FY04 to Rs 3,033 million in FY05 showing phenomenal growth in its PAT by 1,482 percent. The profit before tax for FY05 is Rs 4,777 million that is an improvement of 892 percent over the profit before tax for the FY04. The diluted EPS for the FY05 is 6.89, though in its last quarter of Based on our projected earnings of Rs. 10.20 FY05 it posted an EPS of Rs 2.28 for FY06, assuming 40% growth in net that is equal to the EPS of 3Q05. interest income against 150% growth for ABL is currently trading at a PE multiple of 12 that FY04-FY05, the bank is trading at the PE is almost in line with the banking of 8.24. Applying the multiple of 11.5, which sector PE multiple based on FY05 is at premium to the sector’s average multiple of earnings. The BV of ABL is PBV multiple 2.87 whereas the multiple stands at PBV, ABL is slightly below the
11against 11.6 in the current scenario, as the bank has out performed the sector in terms of growth, the fair value may be computed to Rs. 117, whereas applying the average P/BV of 2.98, prospective ROE of 26% and the earnings for FY06, the fair value comes around Rs. 115.
Rs 29.59, with that comes to about sector PBV 2.98. In terms of currently trading sector multiple.
ABL showed an increase in its advances by 87 percent against the sector’s average growth of 40% whereas the deposits showed a growth of 128 percent. Its Advance/Deposit ratio comes to 69 percent and he Net Interest Income of the bank has increased by 148 percent that constitutes to about 79 percent of the Gross Income of ABL The short term - long term ratio for the FY05 is 68:32 which is in line with the sector’s average ratio of 68:32.
Recommendation: Based on our analysis above, we may recommend to accumulate the share for the target price of Rs. 115.
SCS Bank Analysis CY05 ACBL @ 100- Accumulate for the target price of Rs. 145
The bank has posted the profit after tax of Rs 2,021 million in FY05 showing 5% growth from FY04 mainly due to the heavy provisioning. The diluted EPS for the FY05 is 10.08. ACBL is currently trading at a PE multiple of 9.9 which is at discount to the banking sector PE multiple of 11.6 based on FY05 earnings consequential to he lower growth as compared to the other banks in the sector. Coming to P/BV ROE for he bank is average ROE of the currently trading at 2.32, which is also at sector’s multiple of
Our projected earnings for FY06 is Rs.13.2 assuming 28% growth in net interest income the bank is trading at the PE of 10.6, slight below the sector’s average multiple of 11, the fair value may be computed to Rs. 140 whereas, applying the average P/BV of 2.98, prospective ROE of 26% and the earnings for FY06, the fair value comes around Rs. 151.
multiple, as the slight below the sector, the bank is the multiple of discount to the 2.98.
The ADR have been reduced to 0.72 for F05 from 0.84 for the F04 which is in line with the sector’s average, despite of this fact the net interest income of the bank has been increased by 27.7%, constituting 71.5% of the Gross income. The advances have grown b 23.1 percent whereas the deposits showed a growth of 142.6 percent.
Recommendation: Based on our analysis above, we may recommend to buy the share on dips for the target price of Rs. 145.
SCS Bank Analysis CY05 BOP @ 92- Buy on dips for the target price of Rs. 128
The bottom line has grown by 72% which translates into diluted EPS of Rs. 8.2 as compared to Rs. 4.77 for FY04. The last quarter have shown the outstanding The basis of our selection is the Net interest performance where the EPS growth income growth with which we have come up was 18%. The bank is trading at the PE multiple of 11.2 with the earnings of Rs. 11.48 for FY06 based on the based on which the bank is trading at the current diluted EPS for the year whereas the sector PE of 8. Applying the sector’s average multiple stands at 11.6. multiple of 11 adopting conservative Coming to P/BV suggest that the 2.5 – 3.0 is a good Days”. Our selected trading at the which is at discount the sector’s multiple
approach, where the sector’s PE band has been shifted upward inline with the resulted and expected growth, the fair value may be computed to Rs. 126 , whereas applying the discounted average P/BV of 1.9, prospective ROE of 18% and the earnings for FY06, the fair value comes around Rs. 128. (We have taken the discounted P/BV as the ROE for the bank is at the discount to the sector’s average ROE.)
multiple, the history multiple between measure for “Good bank is currently multiple of 1.93, of approx 60% to of 2.98.
The ADR have been maintained to 0.72, which is in line with the sector’s average despite of this fact the net interest income of the bank has been increased by 75%, constituting 70% of the Gross income. The short term - long term ratio for the FY05 is 72:28 as compared to 65:35 for the FY04 whereas the sector’s average ratio is 68:32, this reduces the chance of liquidity crunch. The advances have increased by 61% whereas the deposits have grown by 162%, both are above the sector’s average.
Recommendation: Based on our analysis above, we may recommend to buy the share on dips for the target price of Rs. 128.
SCS Bank Analysis CY05 MCB @ 230 – Buy for the target price of Rs. 300
The bottom line has grown by 268% which translates into diluted compared to Rs. bank is trading at the based on the diluted Based on our projected earnings of Rs. 26.7 year whereas the for FY06, assuming 45% growth in net interest income against 105% growth for stands at 11.6.
EPS of Rs. 17.8 as 4.83 For FY04. The PE multiple of 12.9 EPS for the current sector’s multiple
Coming to P/BV ROE for the bank is ROE of he sector, currently trading at which is also at the sector’s multiple of
multiple, as the above the average the bank is the multiple of 5, premium to the 2.98.
The ADR have 0.79 for FY05 from but is almost in line average, despite of interest income of increased by 105%, of the Gross
FY04-FY05, the bank is trading at the PE of 8.6. Applying the PE multiple of 11.3, which is at premium to he sector’s average multiple of 11 being conservative, the fair value may be computed to Rs. 301 whereas, applying the P/BV of 4.5 which is again at the premium to the sector’s average multiple of 2.98 (as the bank is above the average in terms of growth and ROE as compared to other banks) prospective ROE of 40% and the earnings for FY06, the fair value comes around Rs. 300.
been increased to 0.62 for the FY04 with the sector’s this fact the net the bank has been constituting 71.9% income.
The advances have grown by 31 percent whereas the deposits showed a growth of 103.7 percent. The short term - long term ratio for the FY05 is 71:29 whereas the sector’s average ratio is 68:32, this reduces the chance of liquidity crunch.
Recommendation: Based on our analysis above, we may recommend to buy the share on dips for the target price of Rs. 300.
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