MCB_Confident on dividend yield outlook, (AKD Daily, Mar 24, 2021)
AKD Daily
MCB: Confident on dividend yield outlook
- MCB Bank (MCB) is perfectly placed for fresh accumulation with latest dividend adjustment enhancing stock’s dividend yield attractiveness, standing at CY21F 11.7%. In this regard, capital base (CET-1 capital to total RWA) stands steadfast at 15.8% as of Dec’20 providing the bank adequate buffer to absorb potential credit risks as Central Bank’s relief period ends while maintaining +80% payout level.
- The stock is trading at a CY21F P/B of 1.0x — discount of 13.3% from historical multiples with CY21-23F ROE averaging at 15.0%. We have a buy stance on the stock with Dec’21TP of PkR227.1/sh offering an upside of 33.0% from last close with capital upside likely to be unlocked as investors gear for an eventual interest rate up cycle.
- ROE of the bank is expected to be supported by bank’s fixed PIBs holding (16.3% of total deposits) and possible recovery in fee income (CY21-23F CAGR: 14.7%). Upside to our estimates comes from, i) unrealized gains on investments of PkR11.7bn, ii) management successfully managing administrative cost growth, and iii) bank’s Islamic Banking subsidiary turning profitable in CY20.
- MCB posted NPAT of PkR29.6bn in CY20 (EPS: PkR24.8) compared to PkR24.0bn (EPS: PkR20.1) in CY19 while announced cumulative dividends of PkR20/sh for the year.
AKD Research
Muslim Commercial Bank, and its subsidiaries, are engaged in commercial banking and the floating, administration and management of modaraba companies, modaraba funds and modarabas.
AKD Securities Ltd. is one of the leading securities firm in Pakistan, providing a comprehensive range of investor focused services, including equity brokerage, economic and securities research, investment banking and financial advisory services. AKD Securities accounts for more than 6% of the average daily value of the Karachi Stock Exchange. AKD Securities was the first brokerage house to launch an online trading platform in Pakistan in November 2002 and now has the largest market share with over 6000 customers. This has helped diversify and expand the retail investor base in the country and ushered in a whole new universe of investors to the stock market.
AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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